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Extending the New Keynesian Monetary Model with Information Revision Processes: Real-time and Revised Data

  • María-Dolores, Ramon
  • Vazquez, Jesus
  • Londoño, Juan M.

    (Departamentos y Servicios::Departamentos de la UMU::Fundamentos del Análisis Económico)

This paper proposes an extended version of the New Keynesian Monetary (NKM) model which contemplates revision processes of output and inflation data in order to assess the influence of data revisions on the estimated monetary policy rule parameters. In line with the evidence provided by Aruoba (2008), by using the indirect inference principle, we observe that real-time data are not rational forecasts of revised data. This result along with the differences observed when estimating a model restricted to white noise revision processes provide evidence that policymakers decisions could be determined by the availability of data at the time of policy implementation.

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File URL: http://digitum.um.es/xmlui/bitstream/10201/4695/1/WPUMUFAE.2009.04.pdf?sequence=1
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Paper provided by DIGITUM. Universidad de Murcia in its series UMUFAE Economics Working Papers with number 4695.

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Length: 22
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:mur:wpaper:4695
Contact details of provider: Web page: http://www.um.es/fee/

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  1. Duffie, Darrell & Singleton, Kenneth J, 1993. "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica, Econometric Society, vol. 61(4), pages 929-52, July.
  2. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
  3. Myles Callan & Eric Ghysels & Norman R. Swanson, 1998. "Monetary Policy Rules with Model and Data Uncertainty," CIRANO Working Papers 98s-40, CIRANO.
  4. Francis X. Diebold & Glenn D. Rudebusch, 1989. "Forecasting output with the composite leading index: an ex ante analysis," Finance and Economics Discussion Series 90, Board of Governors of the Federal Reserve System (U.S.).
  5. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  6. English William B. & Nelson William R. & Sack Brian P., 2003. "Interpreting the Significance of the Lagged Interest Rate in Estimated Monetary Policy Rules," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-18, April.
  7. Aruoba, Boragan, 2005. "Data Revisions Are Not Well-Behaved," CEPR Discussion Papers 5271, C.E.P.R. Discussion Papers.
  8. Tom Stark and Dean Croushore, 2001. "Forecasting with a Real-Time Data Set for Macroeconomists," Computing in Economics and Finance 2001 258, Society for Computational Economics.
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