New‐Keynesian Models and Monetary Policy: A Re‐examination of the Stylized Facts*

Ulf Söderström (), Paul Söderlind and Anders Vredin ()

Scandinavian Journal of Economics, 2005, vol. 107, issue 3, 521-546

Abstract: Using an empirical New‐Keynesian model with optimal discretionary monetary policy, we estimate key parameters—the central bank's preference parameters; the degree of forward‐looking behavior in the determination of inflation and output; and the variances of inflation and output shocks—to match some broad characteristics of U.S. data. The parameterization we obtain implies a small concern for output stability but a large preference for interest rate smoothing, and a small degree of forward‐looking behavior in price‐setting but a large degree of forward‐looking in the determination of output. Our methodology also allows us to carefully examine the consequences of alternative parameterizations and to provide intuition for our results.

Date: 2005
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https://doi.org/10.1111/j.1467-9442.2005.00421.x

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Working Paper: New-Keynesian Models and Monetary Policy: A Reexamination of the Stylized Facts (2003)
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