New Keynesian Models and the Kydland and Prescott Test

Abstract: This paper evaluates New Keynesian models using RBC methods for a number of key macroeconomic variables. Its main findings are that the NK model provides a good description of the behaviour of real variables but performs very poorly when nominal variables are considered. The latter result is puzzling, given the success of NK models in replicating impulse response function and presents a challenge for current models.

Keywords: New Keynesian; Business Cycles; Inflation (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2004-11-02
Note: Type of Document - pdf; pages: 24. This paper evaluates NK models using RBC methods and finds that they have difficulty matching the data.
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