Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of San Francisco
Working Paper Series
Specifying and estimating New Keynesian models with instrument rules and optimal monetary policies
Richard Dennis
Abstract

This paper estimates several popular sticky-price New Keynesian models in an effort to understand whether and under what circumstances these models can usefully describe observed outcomes. We estimate and compare specifications that contain different forms of habit formation, specifications that have either the gap or real marginal costs driving inflation, and specifications that use either optimal policymaking or a forward-looking Taylor-type rule to summarize monetary policy. Among other results, we find that the different forms of habit formation lead to very similar aggregate behavior, that optimal policymaking explains the data as well as a Taylor-type rule does, and that the data speak strongly against specifications that have real marginal costs as the driver in the Phillips curve.


Download Full text
Cite this item
Richard Dennis, Specifying and estimating New Keynesian models with instrument rules and optimal monetary policies, Federal Reserve Bank of San Francisco, Working Paper Series 2004-17, 2004.
More from this series
JEL Classification:
Subject headings:
Keywords: Monetary policy ; Keynesian economics ; Econometric models
For corrections, contact Noah Pollaczek ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal