Calibrating the Equilibrium Condition of a New Keynesian Model with Uncertainty

Kranz Tobias ()
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Kranz Tobias: University of Trier, 54296 Trier, Germany.

Review of Economics, 2017, vol. 68, issue 2, 117-151

Abstract: This paper presents a theoretical analysis of the simulated impact of uncertainty in a New Keynesian model. In order to incorporate uncertainty, the basic three-equation framework is modified by higher-order approximation resulting in a non-linear (dynamic) IS curve. Using impulse response analyses to examine the behavior of the model after a cost shock, I find interest rates in the version with uncertainty to be lower in contrast to the case under certainty.

Keywords: impulse response; new Keynesian model; persistent stochastic shocks; quadratic approximation; simulation; uncertainty (search for similar items in EconPapers)
JEL-codes: E12 E17 E43 E47 E52 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/roe-2017-0009

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