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A Structural Estimation and Interpretation of the New Keynesian Macro Model

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  • Seonghoon Cho

    ()
    (Columbia University)

  • Antonio Moreno

    ()
    (School of Economics and Business Administration, University of Navarra)

Abstract

We formulate and solve a Rational Expectations New Keynesian macro model that implies non-linear cross-equation restrictions on the dynamics of inflation, the output gap and the Federal funds rate. Our maximum likelihood estimation procedure fully imposes these restrictions and yields asymptotic and small sample distributions of the structural parameters. We show how the structural parameters shape the responses of the macro variables to the structural shocks. While the point estimates imply that the Fed has been stabilizing inflation fluctuations since 1980, our econometric analysis suggests considerable uncertainty regarding the stance of the Fed against inflation.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random437a048e3df62/1132241496_wp1403.pdf
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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 14/03.

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Length: 50 pages pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:una:unccee:wp1403

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Web page: http://www.unav.es/facultad/econom

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Citations

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Cited by:
  1. Martin Eichenbaum & Jonas D.M. Fisher, 2003. "Testing the Calvo model of sticky prices," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 40-53.
  2. Marco Lyrio & Hans Dewachter, 2004. "Filtering Long-Run Inflation Expectations with a Structural Macro Model of the Yield Curve," Computing in Economics and Finance 2004 188, Society for Computational Economics.
  3. Andrew Ang & Geert Bekaert & Min Wei, 2008. "The Term Structure of Real Rates and Expected Inflation," Journal of Finance, American Finance Association, vol. 63(2), pages 797-849, 04.
  4. Poghosyan, K., 2012. "Structural and reduced-form modeling and forecasting with application to Armenia," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5590845, Tilburg University.
  5. Seonghoon Cho & Antonio Moreno, 2005. "A Small-Sample Study of the New-Keynesian Macro Model," Faculty Working Papers 03/05, School of Economics and Business Administration, University of Navarra.
  6. Federico Ravenna, 2006. "Vector autoregressions and reduced form representations of DSGE models," Banco de Espa�a Working Papers 0619, Banco de Espa�a.
  7. Mikhail Chernov & Ruslan Bikbov, 2009. "Monetary Policy Regimes and the Term Structure of Interest Rates," 2009 Meeting Papers 334, Society for Economic Dynamics.
  8. Poghosyan, K. & Boldea, O., 2011. "Structural versus Matching Estimation: Transmission Mechanisms in Armenia," Discussion Paper 2011-104, Tilburg University, Center for Economic Research.
  9. Antonio Moreno, 2004. "Reaching Inflation Stability," Econometric Society 2004 North American Summer Meetings 269, Econometric Society.
  10. Marian Vavra, 2013. "Testing for non-linearity in multivariate stochastic processes," Working and Discussion Papers WP 2/2013, Research Department, National Bank of Slovakia.
  11. Antonio Moreno, 2004. "The Feds Monetary Policy Rule: Past, Present and Future," Faculty Working Papers 02/04, School of Economics and Business Administration, University of Navarra.

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