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A Structural Estimation and Interpretation of the New Keynesian Macro Model

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Author Info
Seonghoon Cho () (Columbia University)
Antonio Moreno () (School of Economics and Business Administration, University of Navarra)

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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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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
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Handle: RePEc:una:unccee:wp1403

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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    Other versions:
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Cited by:
(explanations, 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.)

  1. Antonio Moreno, 2004. "Reaching Inflation Stability," Econometric Society 2004 North American Summer Meetings 269, Econometric Society. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!]
  3. Bikbov, Ruslan & Chernov, Mikhail, 2008. "Monetary Policy Regimes and the Term Structure of Interest Rates," CEPR Discussion Papers 7096, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Andrew Ang & Geert Bekaert, 2004. "The term structure of real rates and expected inflation," Proceedings, Federal Reserve Bank of San Francisco, issue Mar. [Downloadable!]
    Other versions:
  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. [Downloadable!]
    Other versions:
  6. 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. [Downloadable!]
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