Recursive Thick Modeling and the Choice of Monetary Policy in Mexico
AbstractBy following the spirit in Favero and Milani (2005), we use recursive thick modeling to take into account model uncertainty for the choice of optimal monetary policy. We consider an open economy model and generate multiple models for only the aggregate demand and aggregate supply. Models are constructed by matching the rankings of aggregate demand and aggregate supply and adding other specifications for the rest of the variables. The main results show that recursive thick modeling with equal and different weights approximates the recent historical behavior of nominal interest rates in Mexico better than recursive thin modeling
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 30.
Date of creation: 04 Jul 2006
Date of revision:
model uncertainty; optimal control; out-of-bag; thin modeling and thick modeling;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-15 (All new papers)
- NEP-CBA-2006-07-15 (Central Banking)
- NEP-MAC-2006-07-15 (Macroeconomics)
- NEP-MON-2006-07-15 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Söderström, Ulf, 2000.
"Monetary policy with uncertain parameters,"
Working Paper Series
0013, European Central Bank.
- Martin Eichenbaum & Charles L. Evans, 1993.
"Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates,"
NBER Working Papers
4271, National Bureau of Economic Research, Inc.
- Martin Eichenbaum & Charles Evans, 1992. "Some empirical evidence on the effects of monetary policy shocks on exchange rates," Working Paper Series, Macroeconomic Issues 92-32, Federal Reserve Bank of Chicago.
- Alexei Onatski & James H. Stock, 2000.
"Robust Monetary Policy Under Model Uncertainty in a Small Model of the U.S. Economy,"
NBER Working Papers
7490, National Bureau of Economic Research, Inc.
- Onatski, Alexei & Stock, James H., 2002. "Robust Monetary Policy Under Model Uncertainty In A Small Model Of The U.S. Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 85-110, February.
- Alexei Onatski & James H. Stock, 1999. "Robust monetary policy under model uncertainty in a small model of the U.S. economy," Proceedings, Federal Reserve Bank of San Francisco.
- Rudebusch, G.D. & Svensson, L.E.O., 1998.
"Policy Rules for Inflation Targeting,"
637, Stockholm - International Economic Studies.
- Glenn Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters, in: Monetary Policy Rules, pages 203-262 National Bureau of Economic Research, Inc.
- Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
- Rudebusch, Glenn D & Svensson, Lars E O, 1998. "Policy Rules for Inflation Targeting," CEPR Discussion Papers 1999, C.E.P.R. Discussion Papers.
- Svensson, Lars E.O. & Rudebusch , Glenn, 1998. "Policy Rules for Inflation Targeting," Seminar Papers 637, Stockholm University, Institute for International Economic Studies.
- Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy Rules for Inflation Targeting," NBER Working Papers 6512, National Bureau of Economic Research, Inc.
- Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Working Papers in Applied Economic Theory 98-03, Federal Reserve Bank of San Francisco.
- Favero, Carlo A & Milani, Fabio, 2005.
"Parameter Instability, Model Uncertainty and the Choice of Monetary Policy,"
CEPR Discussion Papers
4909, C.E.P.R. Discussion Papers.
- Favero Carlo A. & Milani Fabio, 2005. "Parameter Instability, Model Uncertainty and the Choice of Monetary Policy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-33, February.
- Granger, Clive W. J. & Jeon, Yongil, 2004. "Thick modeling," Economic Modelling, Elsevier, vol. 21(2), pages 323-343, March.
- Engert, Walter & Selody, Jack, 1998. "Uncertainty and Multiple Paradigms of the Transmission Mechanism," Working Papers 98-7, Bank of Canada.
- Pesaran, M Hashem & Timmermann, Allan, 1995. " Predictability of Stock Returns: Robustness and Economic Significance," Journal of Finance, American Finance Association, vol. 50(4), pages 1201-28, September.
- Watt, P A, 1979. "Tests of Equality between Sets of Coefficients in Two Linear Regressions When Disturbance Variances Are Unequal: Some Small Sample Properties," The Manchester School of Economic & Social Studies, University of Manchester, vol. 47(4), pages 391-96, December.
- Pierre-Olivier Gourinchas & Aaron Tornell, 1996.
"Exchange Rate Dynamics and Learning,"
NBER Working Papers
5530, National Bureau of Economic Research, Inc.
- Pierre-Olivier Gourinchas & Aaron Tornell, 1996. "Exchange Rate Dynamics and Learning," Harvard Institute of Economic Research Working Papers 1771, Harvard - Institute of Economic Research.
- Giordani, Paolo & Söderlind, Paul, 2002.
"Solution of Macromodels with Hansen-Sargent Robust Policies: Some Extensions,"
Working Paper Series in Economics and Finance
499, Stockholm School of Economics, revised 15 May 2003.
- Giordani, Paolo & Soderlind, Paul, 2004. "Solution of macromodels with Hansen-Sargent robust policies: some extensions," Journal of Economic Dynamics and Control, Elsevier, vol. 28(12), pages 2367-2397, December.
- Fabio Milani, 2008.
"Monetary Policy With A Wider Information Set: A Bayesian Model Averaging Approach,"
Scottish Journal of Political Economy,
Scottish Economic Society, vol. 55(1), pages 1-30, 02.
- Fabio Milani, 2004. "Monetary Policy with a Wider Information Set: a Bayesian Model Averaging Approach," Macroeconomics 0401004, EconWPA.
- Bossaerts, Peter & Hillion, Pierre, 1999. "Implementing Statistical Criteria to Select Return Forecasting Models: What Do We Learn?," Review of Financial Studies, Society for Financial Studies, vol. 12(2), pages 405-28.
- Paul Jenkins & David Longworth, 2002. "Monetary Policy and Uncertainty," Bank of Canada Review, Bank of Canada, vol. 2002(Summer), pages 3-10.
- Rosario Dell'Aquila & Elvezio Ronchetti, 2004. "Stock and Bond Return Predictability : The Discrimination Power of Model Selection Criteria," Research Papers by the Department of Economics, University of Geneva 2004.05, Département des Sciences Économiques, Université de Genève.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.