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A Structural Estimation and Interpretation of the New Keynesian Macro Model

Listed author(s):
  • Seonghoon Cho

    ()

    (Columbia University)

  • Antonio Moreno

    ()

    (School of Economics and Business Administration, University of Navarra)

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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File URL: http://www.unav.edu/documents/10174/6546776/1132241496_wp1403.pdf
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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
Date of creation: 03 Nov 2003
Handle: RePEc:una:unccee:wp1403
Contact details of provider: Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales

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