Search Results
Showing results 1 to 10 of approximately 52.
(refine search)
Working Paper
Specifying and estimating New Keynesian models with instrument rules and optimal monetary policies
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, ...
Report
New Keynesian models: not yet useful for policy analysis
Macroeconomists have largely converged on method, model design, reduced-form shocks, and principles of policy advice. Our main disagreements today are about implementing the methodology. Some think New Keynesian models are ready to be used for quarter-to-quarter quantitative policy advice; we do not. Focusing on the state-of-the-art version of these models, we argue that some of its shocks and other features are not structural or consistent with microeconomic evidence. Since an accurate structural model is essential to reliably evaluate the effects of policies, we conclude that New Keynesian ...
Working Paper
Estimating forward looking Euler equations with GMM estimators: an optimal instruments approach
This paper compares different methods for estimating forward-looking output and inflation Euler equations and shows that weak identification can be an issue in conventional GMM estimation. The authors propose a GMM procedure that imposes the dynamic constraints implied by the forward-looking relation on the instruments set. This ?optimal instruments? procedure is more reliable than conventional GMM, and it provides a robust alternative to estimating dynamic macroeconomic relations. Empirical applications of this procedure suggest only a limited role for expectational terms.
Working Paper
ECB monetary policy in the recession: a New Keynesian (old monetarist) critique
Use of the New Keynesian model to identify shocks points to contractionary monetary policy as the cause of the Great Recession in the Eurozone.
Speech
Macro models and monetary policy analysis
Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia. Bundesbank ? Federal Reserve Bank of Philadelphia Spring 2012 Research Conference, Eltville, Germany, May 25, 2012
Working Paper
Discretion Rather than Rules: Equilibrium Uniqueness and Forward Guidance with Inconsistent Optimal Plans
New Keynesian economies with active interest rate rules gain equilibrium determinacy from the central bank?s incredible off-equilibrium-path promises (Cochrane, 2011). We suppose instead that the central bank sets interest rate paths and occasionally has the discretion to change them. Private agents taking future central bank actions and their own best responses to them as given reduces the scope for self-fulfilling prophecies. With empirically-reasonable frequencies of central-bank reoptimization, the monetary-policy game has a unique Markov-perfect equilibrium wherein forward guidance ...
Journal Article
The debate: Keynesians
Working Paper
Catching with the Keynesians
This paper examines the role for tax policies in productivity-shock driven economies with "catching-up-with-the-Joneses" utility functions. The optimal tax policy is shown to affect the economy counter-cyclically via procyclical taxes, i.e., "cooling down" the economy with higher taxes when it is "overheating" in booms and "stimulating" the economy with lower taxes in recessions to keep consumption up. Thus, models with catching-up-with-the-Joneses utility functions call for traditional Keynesian demand management policies. Parameter values from Campbell and Cochrane (1995) are also ...
Working Paper
Is Keynesian economics a dead end?