International evidence on the stability of the optimizing IS equation

Amit Kara and Edward Nelson

No 2003-020, Working Papers from Federal Reserve Bank of St. Louis

Abstract: In this paper we provide international evidence on the issue of whether the optimizing IS equation is more stable than a backward-looking alternative. The international evidence consist of estimates of IS equations on quarterly data for the UK and Australia, both for the full sample of the last 40 years and for the period following major monetary policy shifts in 1979-80. Our results suggest that the parameters in the optimizing IS equations are more empirically stable than those of the backward-looking alternative. The use of dynamic general equilibrium modelling in empirical work does deliver material benefits, in the form of equations that are more suitable for monetary policy analysis.

Keywords: Monetary policy; Macroeconomics; Econometric models (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (9)

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Journal Article: International Evidence on the Stability of the Optimizing IS Equation (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2003-020

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DOI: 10.20955/wp.2003.020

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