IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Evaluating Interest Rate Rules in an Estimated DSGE Model

  • Andrea Tambalotti

    (Federal Reserve Bank of New York)

  • Andrea Ferrero

    (Federal Reserve Bank of New York)

  • Vasco Curdia

    (Federal Reserve Bank of New York)

The empirical DSGE literature pays surprisingly little attention to the behavior of the monetary authority. Alternative policy rule specifications abound but their relative merit is rarely discussed. We provide some of this discussion by comparing the fit of a large set of interest rate rules (44 in total), which we estimate as part of a simple New Keynesian model. We find that specifications in which monetary policy responds to inflation and to deviations of output from its efficient level — which would prevail in the absence of distortions — have the worst fit within the set we consider. Policies that respond to measures of the output gap based on statistical filters perform better, but the best fitting rules are those that also track the evolution of the model-consistent efficient real interest rate.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.economicdynamics.org/meetpapers/2010/paper_402.pdf
Download Restriction: no

Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 402.

as
in new window

Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:red:sed010:402
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Web page: http://www.EconomicDynamics.org/society.htm
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Justiniano, Alejandro & Primiceri, Giorgio E & Tambalotti, Andrea, 2008. "Investment Shocks and Business Cycles," CEPR Discussion Papers 6739, C.E.P.R. Discussion Papers.
  2. Malin Adolfson & Stefan Laséen & Jesper Lindé & Lars E.O. Svensson, 2008. "Optimal Monetary Policy in an Operational Medium-Sized DSGE Model," NBER Working Papers 14092, National Bureau of Economic Research, Inc.
  3. Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
  4. Giorgio Primiceri & Andrea Tambalotti & Alejandro Justiniano, 2011. "Is there a trade-off between inflation and output stabilization?," 2011 Meeting Papers 280, Society for Economic Dynamics.
  5. Thomas Laubach & John C. Williams, 2001. "Measuring the natural rate of interest," Finance and Economics Discussion Series 2001-56, Board of Governors of the Federal Reserve System (U.S.).
  6. Edge, Rochelle M. & Kiley, Michael T. & Laforte, Jean-Philippe, 2008. "Natural rate measures in an estimated DSGE model of the U.S. economy," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2512-2535, August.
  7. Jordi Galí & Mark Gertler, 2007. "Macroeconomic modeling for monetary policy evaluation," Economics Working Papers 1039, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2007.
  8. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1415-1464, November.
  9. Giorgio Primiceri & Ernst Schaumburg & Andrea Tambalotti, 2006. "Intertemporal disturbances," 2006 Meeting Papers 355, Society for Economic Dynamics.
  10. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
  11. John P. Judd & Glenn D. Rudebusch, 1998. "Taylor's rule and the Fed, 1970-1997," Economic Review, Federal Reserve Bank of San Francisco, pages 3-16.
  12. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231.
  13. Michel Juillard & Ondrej Kamenik & Michael Kumhof & Douglas Laxton, 2006. "Measures of Potential Output from an Estimated DSGE Model of the United States," Working Papers 2006/11, Czech National Bank, Research Department.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed010:402. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.