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Macroeconomic dynamics and the IS puzzle

Listed author(s):
  • Hawkins, Raymond J.
  • Nguyen, Chau N.
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    The authors solve the IS puzzle for the G7 countries. They find that five of the G7 countries have the expected significant negative relationship between the output gap and the realrate gap; the time series of the remaining two show material deviation from expected IScurve behavior. The authors show that the observed time dependence of the interaction between the output and real-rate gaps can be represented in a parsimonious and practical manner using the theory of anelasticity that unifies partial-adjustment specifications of the IS curve.

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    File URL: http://www.economics-ejournal.org/economics/discussionpapers/2017-20
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    File URL: https://www.econstor.eu/bitstream/10419/158562/1/888183593.pdf
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    Paper provided by Kiel Institute for the World Economy (IfW) in its series Economics Discussion Papers with number 2017-20.

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    Date of creation: 2017
    Handle: RePEc:zbw:ifwedp:201720
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    1. Marvin Goodfriend & Robert King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296 National Bureau of Economic Research, Inc.
    2. 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.
    3. Holston, Kathryn & Laubach, Thomas & Williams, John C., 2017. "Measuring the natural rate of interest: International trends and determinants," Journal of International Economics, Elsevier, vol. 108(S1), pages 59-75.
    4. Hafer, R.W. & Jones, Garett, 2008. "Dynamic IS curves with and without money: An international comparison," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 609-616, June.
    5. Charles Goodhart & Boris Hofmann, 2005. "The Phillips Curve, the IS Curve and Monetary Transmission: Evidence for the US and the Euro Area," CESifo Economic Studies, CESifo, vol. 51(4), pages 757-775.
    6. Charles Goodhart & Boris Hofmann, 2005. "The IS curve and the transmission of monetary policy: is there a puzzle?," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 29-36.
    7. Nelson, Edward, 2002. "Direct effects of base money on aggregate demand: theory and evidence," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 687-708, May.
    8. Peersman, Gert & Smets, Frank, 1999. "The Taylor Rule: A Useful Monetary Policy Benchmark for the Euro Area?," International Finance, Wiley Blackwell, vol. 2(1), pages 85-116, April.
    9. Raymond Hawkins, 2015. "Okun’s law and anelastic relaxation in economics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(1), pages 151-161, April.
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