 Monetary policy indeterminacy in the U.S.: results from a classical testEfrem Castelnuovo and Luca Fanelli () No 8, Quaderni di Dipartimento from Department of Statistics, University of Bologna Abstract: We work with a newly developed method to empirically assess whether a specified new-Keynesian business cycle monetary model estimated with U.S. quarterly data is consistent with a unique equilibrium or multiple equilibria under rational expectations. We conduct classical tests to verify if the structural model is correctly specified. Conditional on a positive answer, we formally assess if such model is either consistent with a unique equilibrium or with indeterminacy. Importantly, our full-system approach requires neither the use of prior distributions nor that of nonstandard inference. The case of an indeterminate equilibrium in the pre-1984 sample and of a determinate equilibrium in the post-1984 sample is favored by the data. The long-run coefficients on inflation and the output gap in the monetary policy rule are found to be weakly identified. However, our results are further supported by a proposed identification-robust indicator of indeterminacy Keywords: GMM; Indeterminatezza; Massima Verosimiglianza; Errata specificazione; modello neo-Keynesiano per il ciclo economico; VAR; Identificazione debole GMM; Indeterminacy; Maximum Likelihood; Misspecification; new-Keynesian business cycle model; VAR; Weak identification. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bot:quadip:wpaper:112 Access Statistics for this paper More papers in Quaderni di Dipartimento from Department of Statistics, University of Bologna Contact information at EDIRC. |
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