WHAT WE DON'T KNOW ABOUT THE MONETARY TRANSMISSION MECHANISM AND WHY WE DON'T KNOW IT

Andreas Beyer () and Roger Farmer

Macroeconomic Dynamics, 2008, vol. 12, issue S1, 60-74

Abstract: We study identification in a class of linear rational expectations models. For any given exactly identified model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. We use our algorithm to show that a model proposed by Jess Benhabib and Roger Farmer is observationally equivalent to the standard new-Keynesian model when observed over a single policy regime. However, the two models have different implications for the design of an optimal policy rule.

Date: 2008
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Working Paper: What We Don't Know About the Monetary Transmission Mechanism and Why We Don't Know It (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:12:y:2008:i:s1:p:60-74_06

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