Assessing Sticky Price Models Using the Burns and Mitchell Approach

Juan P ez-Farrell ()
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Juan P ez-Farrell: Cardiff Business School
Authors registered in the RePEc Author Service: Juan Paez-Farrell

No E2006/17, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper evaluates sticky-price models using the methods proposed by Burns and Mitchell, focusing on the monetary aspects of the business cycle. Recent research has emphasised the responses of models to shocks at the expense its systematic component. Whereas sticky-price models have been successful at replicating impulse response functions from VARs, this paper highlights that they are unable to mimic the data for nominal variables. Moreover, the results are robust to the specification of the Phillips curve, including its backward-looking variant,calibrated values and the inclusion of fiscal policy shocks. Since being able to mimic the data is the lowest hurdle a model must pass, these results pose a challenge for New Keynesian-type models.

Keywords: New Keynesian Models; Business Cycles; Correlations; Burns and Mitchell (search for similar items in EconPapers)
JEL-codes: E32 E52 E58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-03
New Economics Papers: this item is included in nep-cba and nep-mac
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Forthcoming in Applied Economics

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Journal Article: Assessing sticky price models using the Burns and Mitchell approach (2008)
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