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Identifying Taylor rules in macro-finance models

David Backus, Mikhail Chernov () and Stanley Zin

No 9611, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Identification problems arise naturally in forward-looking models when agents observe more than economists. We illustrate the problem in several macro-finance models with Taylor rules. When the shock to the rule is observed by agents but not economists, identification of the rule's parameters requires restrictions on the form of the shock. We show how such restrictions work when we observe the state directly, indirectly, or infer it from observables.

Keywords: exponential-affine models; forward-looking models; information sets; monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E52 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2013-08
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