Does the Barro-Gordon Model Explain the Behavior of US Inflation? a Reexamination of the Empirical Evidence
AbstractThis paper tests the predictions of the Barro-Gordon model using US data on inflation and unemployment. To that end, it constructs a general game-theoretical model with asymmetric preferences that nests the Barro-Gordon model and a version of Cukierman’s model as special cases. Likelihood Ratio tests indicate that the restriction imposed by the Barro-Gordon model is rejected by the data but the one imposed by the version of Cukierman’s model is not. Reduced-form estimates are consistent with the view that the Federal Reserve weights more heavily positive than negative unemployment deviations from the expected natural rate.
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Bibliographic InfoPaper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2002-07.
Length: 18 pages
Date of creation: 2002
Date of revision:
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asymmetric eferences; udence; game-theoretical models of monetary licy; ARCH;
Other versions of this item:
- Ruge-Murcia, Francisco J., 2003. "Does the Barro-Gordon model explain the behavior of US inflation? A reexamination of the empirical evidence," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1375-1390, September.
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