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Technology Shocks in the New Keynesian Model

  • Peter N. Ireland


    (Boston College)

In a New Keynesian model, technology and cost-push shocks compete as terms that stochastically shift the Phillips curve. A version of this model, estimated via maximum likelihood, points to the cost-push shock as far more important than the technology shock in explaining the behavior of output, inflation, and interest rates in the postwar United States data. These results weaken the links between the current generation of New Keynesian models and the real business cycle models from which they were originally derived; they also suggest that Federal Reserve ocials have often faced dicult trade-offs in conducting monetary policy.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 536.

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Length: 37 pages
Date of creation: 13 Aug 2002
Date of revision:
Handle: RePEc:boc:bocoec:536
Contact details of provider: Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
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  18. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-39, March.
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