IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v387y2008i15p3817-3825.html
   My bibliography  Save this article

Non-robust dynamic inferences from macroeconometric models: Bifurcation stratification of confidence regions

Author

Listed:
  • Barnett, William A.
  • Duzhak, Evgeniya Aleksandrovna

Abstract

Grandmont [J.M. Grandmont, On endogenous competitive business cycles, Econometrica 53 (1985) 995–1045] found that the parameter space of the most classical dynamic models is stratified into an infinite number of subsets supporting an infinite number of different kinds of dynamics, from monotonic stability at one extreme to chaos at the other extreme, and with many forms of multiperiodic dynamics in between. The econometric implications of Grandmont’s findings are particularly important, if bifurcation boundaries cross the confidence regions surrounding parameter estimates in policy-relevant models. Stratification of a confidence region into bifurcated subsets seriously damages robustness of dynamical inferences.

Suggested Citation

  • Barnett, William A. & Duzhak, Evgeniya Aleksandrovna, 2008. "Non-robust dynamic inferences from macroeconometric models: Bifurcation stratification of confidence regions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3817-3825.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:15:p:3817-3825
    DOI: 10.1016/j.physa.2008.01.045
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437108000757
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/j.physa.2008.01.045?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
    2. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
    3. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    4. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, December.
    5. William A. Barnett & Yijun He & ., 1999. "Stabilization Policy as Bifurcation Selection: Would Keynesian Policy Work if the World Really were Keynesian?," Macroeconomics 9906008, University Library of Munich, Germany.
    6. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
    7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    8. William T. Gavin, 2003. "Inflation targeting: why it works and how to make it work better," Working Papers 2003-027, Federal Reserve Bank of St. Louis.
    9. Benhabib, Jess & Rustichini, Aldo, 1991. "Vintage capital, investment, and growth," Journal of Economic Theory, Elsevier, vol. 55(2), pages 323-339, December.
    10. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348, National Bureau of Economic Research, Inc.
    11. Barnett, William A. & He, Yijun, 2002. "Stabilization Policy As Bifurcation Selection: Would Stabilization Policy Work If The Economy Really Were Unstable?," Macroeconomic Dynamics, Cambridge University Press, vol. 6(5), pages 713-747, November.
    12. Barnett, William A. & Duzhak, Evgeniya Aleksandrovna, 2008. "Non-robust dynamic inferences from macroeconometric models: Bifurcation stratification of confidence regions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3817-3825.
    13. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    14. McCallum, Bennett T., 1999. "Issues in the design of monetary policy rules," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 23, pages 1483-1530, Elsevier.
    15. Adam Hale Shapiro, 2008. "Estimating the New Keynesian Phillips Curve: A Vertical Production Chain Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 627-666, June.
    16. Eric M. Leeper & Christopher A. Sims, 1994. "Toward a Modern Macroeconomic Model Usable for Policy Analysis," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 81-140, National Bureau of Economic Research, Inc.
    17. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    18. Jess Benhabib & Kazuo Nishimura, 2012. "The Hopf Bifurcation and Existence and Stability of Closed Orbits in Multisector Models of Optimal Economic Growth," Springer Books, in: John Stachurski & Alain Venditti & Makoto Yano (ed.), Nonlinear Dynamics in Equilibrium Models, edition 127, chapter 0, pages 51-73, Springer.
    19. Bergstrom, A. R. & Nowman, K. B. & Wymer, C. R., 1992. "Gaussian estimation of a second order continuous time macroeconometric model of the UK," Economic Modelling, Elsevier, vol. 9(4), pages 313-351, October.
    20. S. Rao Aiyagari, 1989. "Can There Be Short-Period Deterministic Cycles When People Are Long Lived?," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 163-185.
    21. repec:cup:macdyn:v:6:y:2002:i:5:p:713-47 is not listed on IDEAS
    22. Barnett William A. & He Yijun, 1999. "Stability Analysis of Continuous-Time Macroeconometric Systems," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 3(4), pages 1-22, January.
    23. William A. Barnett & Yijun He, 2002. "Bifurcations in Macroeconomic Models," Macroeconomics 0210006, University Library of Munich, Germany.
    24. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    25. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Aug), pages 9-110.
    26. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
    27. Benhabib, Jess & Day, Richard H., 1982. "A characterization of erratic dynamics in, the overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 37-55, November.
    28. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, March.
    29. Bergstrom, A. R. & Nowman, K. B. & Wandasiewicz, S., 1994. "Monetary and fiscal policy in a second-order continuous time macroeconometric model of the United Kingdom," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 731-761.
    30. Dowrick,Steve & Pitchford,Rohan & Turnovsky,Stephen J. (ed.), 2004. "Economic Growth and Macroeconomic Dynamics," Cambridge Books, Cambridge University Press, number 9780521835619.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Barnett, William A. & Bella, Giovanni & Ghosh, Taniya & Mattana, Paolo & Venturi, Beatrice, 2022. "Shilnikov chaos, low interest rates, and New Keynesian macroeconomics," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).
    2. Banerjee, Sanjibani & A. Barnett, William & A. Duzhak, Evgeniya & Gopalan, Ramu, 2011. "Bifurcation analysis of Zellner's Marshallian Macroeconomic Model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1577-1585, September.
    3. Chatelain, Jean-Bernard & Ralf, Kirsten, 2020. "Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics.
    4. Barnett, William A. & Eryilmaz, Unal, 2016. "An Analytical And Numerical Search For Bifurcations In Open Economy New Keynesian Models," Macroeconomic Dynamics, Cambridge University Press, vol. 20(2), pages 482-503, March.
    5. Barnett, William A. & Duzhak, Evgeniya Aleksandrovna, 2008. "Non-robust dynamic inferences from macroeconometric models: Bifurcation stratification of confidence regions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(15), pages 3817-3825.
    6. Barnett, William A. & Eryilmaz, Unal, 2013. "Hopf bifurcation in the Clarida, Gali, and Gertler model," Economic Modelling, Elsevier, vol. 31(C), pages 401-404.
    7. Chatelain, Jean-Bernard & Ralf, Kirsten, 2021. "Hopf Bifurcation From New-Keynesian Taylor Rule To Ramsey Optimal Policy," Macroeconomic Dynamics, Cambridge University Press, vol. 25(8), pages 2204-2236, December.
    8. Chatelain, Jean-Bernard & Ralf, Kirsten, 2022. "Ramsey Optimal Policy In The New-Keynesian Model With Public Debt," Macroeconomic Dynamics, Cambridge University Press, vol. 26(6), pages 1588-1614, September.
    9. William Barnett & Evgeniya Duzhak, 2010. "Empirical assessment of bifurcation regions within New Keynesian models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 99-128, October.
    10. William Barnett & Unal Eryilmaz, 2022. "Monetary Policy and Determinacy: An Inquiry in Open Economy New Keynesian Framework," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202203, University of Kansas, Department of Economics.
    11. Mthuli Ncube & Mthokozisi M. Tshuma, 2010. "Working Paper 113 - Monetary Policy Conduct Based on Nonlinear Taylor Rule: Evidence from South Africa," Working Paper Series 250, African Development Bank.
    12. William, Barnett & Hu, Jingxian, 2017. "Capital Control, Exchange Rate Regime, and Monetary Policy: Indeterminacy and Bifurcation," MPRA Paper 81450, University Library of Munich, Germany.
    13. Barnett, William A. & Duzhak, Evgeniya A., 2019. "Structural Stability Of The Generalized Taylor Rule," Macroeconomic Dynamics, Cambridge University Press, vol. 23(4), pages 1664-1678, June.
    14. Barnett, William A. & He, Susan, 2010. "Existence of singularity bifurcation in an Euler-equations model of the United States economy: Grandmont was right," Economic Modelling, Elsevier, vol. 27(6), pages 1345-1354, November.
    15. Barnett, William A. & Chen, Guo, 2015. "Bifurcation of Macroeconometric Models and Robustness of Dynamical Inferences," Foundations and Trends(R) in Econometrics, now publishers, vol. 8(1-2), pages 1-144, September.
    16. William A. Barnett & Unal Eryilmaz, 2023. "Monetary Policy and Determinacy: An Inquiry into Open Economy New Keynesian Macrodynamics," Open Economies Review, Springer, vol. 34(2), pages 217-253, April.
    17. Mohd Naim Bin Mohd Johari & Adem Kilicman, 2017. "Hopf bifurcation in an open monetary economic system: Taylor vs. inflation targeting rules (Malaysian case)," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1327184-132, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. William Barnett & Evgeniya Duzhak, 2010. "Empirical assessment of bifurcation regions within New Keynesian models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 99-128, October.
    2. Barnett, William A. & Chen, Guo, 2015. "Bifurcation of Macroeconometric Models and Robustness of Dynamical Inferences," Foundations and Trends(R) in Econometrics, now publishers, vol. 8(1-2), pages 1-144, September.
    3. Barnett, William A. & Duzhak, Evgeniya A., 2019. "Structural Stability Of The Generalized Taylor Rule," Macroeconomic Dynamics, Cambridge University Press, vol. 23(4), pages 1664-1678, June.
    4. Barnett, William A. & He, Susan, 2010. "Existence of singularity bifurcation in an Euler-equations model of the United States economy: Grandmont was right," Economic Modelling, Elsevier, vol. 27(6), pages 1345-1354, November.
    5. Coenen, Gunter & Wieland, Volker, 2005. "A small estimated euro area model with rational expectations and nominal rigidities," European Economic Review, Elsevier, vol. 49(5), pages 1081-1104, July.
    6. Banerjee, Sanjibani & A. Barnett, William & A. Duzhak, Evgeniya & Gopalan, Ramu, 2011. "Bifurcation analysis of Zellner's Marshallian Macroeconomic Model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1577-1585, September.
    7. Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2008. "The New Keynesian Phillips Curve: From Sticky Inflation to Sticky Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 667-699, June.
    8. Dennis, Richard & Soderstrom, Ulf, 2006. "How Important Is Precommitment for Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 847-872, June.
    9. Marc Giannoni & Michael Woodford, 2004. "Optimal Inflation-Targeting Rules," NBER Chapters, in: The Inflation-Targeting Debate, National Bureau of Economic Research, Inc.
    10. Lars E. O. Svensson, 2003. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 426-477, June.
    11. Steinsson, Jon, 2003. "Optimal monetary policy in an economy with inflation persistence," Journal of Monetary Economics, Elsevier, vol. 50(7), pages 1425-1456, October.
    12. Michael Paetz, 2007. "Robust Control and Persistence in the New Keynesian Economy," Quantitative Macroeconomics Working Papers 20711, Hamburg University, Department of Economics.
    13. repec:zbw:bofrdp:2007_032 is not listed on IDEAS
    14. Mash, Richard, 2002. "New Keynesian Microfoundations Revisited: A Generalised Calvo-Taylor Model and the Desirability of Inflation vs. Price Level Targeting," Royal Economic Society Annual Conference 2002 138, Royal Economic Society.
    15. Glenn D. Rudebusch, 2002. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Economic Journal, Royal Economic Society, vol. 112(479), pages 402-432, April.
    16. Wieland, Volker & Cwik, Tobias & Müller, Gernot J. & Schmidt, Sebastian & Wolters, Maik, 2012. "A new comparative approach to macroeconomic modeling and policy analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 523-541.
    17. Beetsma, Roel M.W.J. & Jensen, Henrik, 2005. "Monetary and fiscal policy interactions in a micro-founded model of a monetary union," Journal of International Economics, Elsevier, vol. 67(2), pages 320-352, December.
    18. George W. Evans & Seppo Honkapohja, 2009. "Expectations, Learning and Monetary Policy: An Overview of Recent Research," Central Banking, Analysis, and Economic Policies Book Series, in: Klaus Schmidt-Hebbel & Carl E. Walsh & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.),Monetary Policy under Uncertainty and Learning, edition 1, volume 13, chapter 2, pages 027-076, Central Bank of Chile.
    19. Fair, Ray C., 2007. "Evaluating Inflation Targeting Using a Macroeconometric Model," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-52.
    20. Henrik Jensen, 2002. "Targeting Nominal Income Growth or Inflation?," American Economic Review, American Economic Association, vol. 92(4), pages 928-956, September.
    21. Manfred Gärtner, 2008. "The Political Economy of Monetary Policy Conduct and Central Bank Design," Springer Books, in: Readings in Public Choice and Constitutional Political Economy, chapter 24, pages 423-446, Springer.

    More about this item

    Keywords

    Bifurcation; Hopf bifurcation; Euler equations; New-Keynesian macroeconometrics; Bergstrom–Wymer model;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:387:y:2008:i:15:p:3817-3825. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.