Macroeconomic Fluctuations Without Indeterminacy
Joshua Brault (),
Hashmat Khan (),
Louis Phaneuf () and
Jean Gardy Victor ()
Additional contact information
Joshua Brault: Department of Economics, Carleton University, https://carleton.ca/economics/people/brault-joshua/
Hashmat Khan: Department of Economics, Carleton University3, https://carleton.ca/economics/people/khan-hashmat-u/
Louis Phaneuf: Department of Economics, Universite du Quebec a Montreal, https://professeurs.uqam.ca/professeur/phaneuf.louis/
No 21-01, Carleton Economic Papers from Carleton University, Department of Economics
We estimate a multi-shock DSGE model with a Bayesian method allowing for determinacy or indeterminacy (Bianchi and Nicoló, 2020). Contrary to conventional wisdom, determinacy is preferred to indeterminacy before and after 1980. The post-1984 contribution of shocks to the marginal efficiency of investment to the cyclical variance of output growth fell dramatically, from 50% to 20%. Greater nominal wage flexibility drove the large decline in output and employment fluctuations after 1984. Inflation variability declined from a hawkish policy stance against inflation and changes in preference parameters. Lower trend inflation and smaller shocks did not play a key role.
Keywords: Conventional Monetary Policy; Determinacy; Bayesian Estimation; Sources of Business Cycle; Changes in Aggregate Volatility (search for similar items in EconPapers)
JEL-codes: E31 E32 E37 (search for similar items in EconPapers)
Pages: 45 pages
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-dge, nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Published: Carleton Economics Papers
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:21-01
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Carleton Economic Papers from Carleton University, Department of Economics C870 Loeb Building, 1125 Colonel By Drive, Ottawa Ontario, K1S 5B6 Canada.
Bibliographic data for series maintained by Sabrina Robineau ().