Towards a compact, empirically verified rational expectations model for monetary policy analysis

Jeffrey C. Fuhrer ()

No 96-8, Working Papers from Federal Reserve Bank of Boston

Abstract: This paper extends the sticky-price models of Fuhrer and Moore (1995a,b) to include explicit, optimization-based consumption and investment decisions. The goal is to use the resulting model for monetary policy analysis; consequently, strong emphasis is placed on empirical validation of the model. I use a canonical formulation of the consumer's problem from Campbell and Mankiw (1989), and a time-to-build investment model with costs of adjustment. The restrictions imposed by these models, in conjunction with those imposed on prices and output by the Fuhrer-Moore contracting specification, imply dynamic behavior that is grossly inconsistent with the data.

Keywords: Monetary policy; Rational expectations (Economic theory) (search for similar items in EconPapers)
Date: 1996
View list of references

Published in Carnegie-Rochester Conference Series on Public Policy 47 (December 1997): 197-230.

Downloads: (external link)
http://www.bos.frb.org/economic/wp/wp1996/wp96_8.htm (text/html)
http://www.bos.frb.org/economic/wp/wp1996/wp96_8.pdf (application/pdf)

Related works:
Journal Article: Towards a compact, empirically-verified rational expectations model for monetary policy analysis (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fip:fedbwp:96-8

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Boston
Contact information at EDIRC.
Series data maintained by Diane Rosenberger ().