A FREQUENCY-DOMAIN APPROACH TO DYNAMIC MACROECONOMIC MODELS

Fei Tan

Macroeconomic Dynamics, 2021, vol. 25, issue 6, 1381-1411

Abstract: This article proposes a unified framework for solving and estimating linear rational expectations models with a variety of frequency-domain techniques, some established, some new. The solution methodology is applicable to a wide class of models and leads to straightforward construction of the spectral density for performing likelihood-based inference. We also generalize the well-known spectral decomposition of the Gaussian likelihood function to a composite version implied by several competing models. Taken together, these techniques yield fresh insights into the model’s theoretical and empirical implications beyond conventional time-domain approaches can offer. We illustrate the proposed framework using a prototypical new Keynesian model with fiscal details and two determinate monetary–fiscal policy regimes. The model is simple enough to deliver an analytical solution that makes the policy effects transparent under each regime, yet still able to shed light on the empirical interactions between US monetary and fiscal policies along different frequencies.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
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: https://EconPapers.repec.org/RePEc:cup:macdyn:v:25:y:2021:i:6:p:1381-1411_3

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().