Term structure and the estimated monetary policy rule in the eurozone

Ramón Maria-Dolores and Jesús Vázquez

No 827, Working Papers from Banco de España

Abstract: In this paper we estimate a standard version of the New Keynesian Monetary (NKM) model augmented with term structure in order to analyze two issues. First, we analyze the effect of introducing an explicit term structure channel in the NKM model on the estimated parameter values of the model, with special emphasis on the interest rate smoothing parameter using data for the Eurozone. Second, we study the ability of the model to reproduce some stylized facts such as highly persistent dynamics, the weak comovement between economic activity and inflation, and the positive, strong comovement between interest rates observed in actual Eurozone data. The estimation procedure implemented is a classical structural method based on the indirect inference principle.

Keywords: NKM model; term structure; policy rule; indirect inference (search for similar items in EconPapers)
JEL-codes: C32 E30 E52 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2008-12
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Term structure and the estimated monetary policy rule in the Eurozone (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0827

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