A Small-Sample Study of the New-Keynesian Macro Model

This paper presents a small-sample study of the three-equation-three variable New-Keynesian macro model. 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 aga...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2006-09, Vol.38 (6), p.1461-1481
Main Authors: Cho, Seonghoon, Moreno, Antonio
Format: Article
Language:English
Subjects:
Analysis
Bank credit
Data analysis
Distribution (Economics)
Economic models
Economic shock
Eigenvalues
Federal Reserve Bank
Federal Reserve monetary policy
Inflation
Inflation rates
Interest rates
Keynesian theory
Macroeconomics
Model testing
Modeling
Monetary economics
Monetary policy
Monetary policy rule
Neokeynesianism
Output gaps
Parametric models
Public sector
Samples
Stabilization policy
Studies
Uncertainty
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Description
Summary:This paper presents a small-sample study of the three-equation-three variable New-Keynesian macro model. 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. The canonical New-Keynesian macro model is strongly rejected by the likelihood ratio test, but we propose the direction in which it needs to be modified in order to fit the data.
ISSN:0022-2879
1538-4616
1538-4616
DOI:10.1353/mcb.2006.0078