Recursive Thick Modeling and the Choice of Monetary Policy in Mexico

Arnulfo Rodriguez () and Pedro N. Rodriguez
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Arnulfo Rodriguez: Economic Studies Division Bank of Mexico
Pedro N. Rodriguez: Universidad Complutense de Madrid

No 30, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: By following the spirit in Favero and Milani (2005), we use recursive thick modeling to take into account model uncertainty for the choice of optimal monetary policy. We consider an open economy model and generate multiple models for only the aggregate demand and aggregate supply. Models are constructed by matching the rankings of aggregate demand and aggregate supply and adding other specifications for the rest of the variables. The main results show that recursive thick modeling with equal and different weights approximates the recent historical behavior of nominal interest rates in Mexico better than recursive thin modeling

Keywords: model uncertainty; optimal control; out-of-bag; thin modeling and thick modeling (search for similar items in EconPapers)
JEL-codes: C61 E61 (search for similar items in EconPapers)
Date: 2006-07-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:30

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