Working Paper
Monetary policy analysis with potentially misspecified models
Abstract: The paper proposes a novel method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models and applies it to a New Keynesian DSGE model along the lines of Christiano, Eichenbaum, and Evans (JPE2005) and Smets and Wouters (JEEA2003). We first quantify the degree of model misspecification and then illustrate its implications for the performance of different interest-rate feedback rules. We find that many of the prescriptions derived from the DSGE model are robust to model misspecification.
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File(s): File format is application/pdf https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2006/wp06-4.pdf
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Philadelphia
Part of Series: Working Papers
Publication Date: 2005
Number: 06-4