Assessing predetermined expectations in the standard sticky-price model: a Bayesian approach

Peter Welz

No 621, Working Paper Series from European Central Bank

Abstract: This paper analyses the empirical performance of a New Keynesian stickyprice model with delayed effects of monetary impulses on inflation and output for the German pre-EMU economy. The model is augmented with rule-ofthumb behaviour in consumption and price setting. Using recently developed Bayesian estimation techniques, endogenous persistence is found to play a dominant role in consumption whereas forward-looking behaviour is greater for inflation. The model's dynamics following a monetary shock and a preference shock are comparable to those of an identified VAR model. JEL Classification: C51, E43, E52

Keywords: bayesian estimation; DSGE-Model; identified VAR; predetermined expectations (search for similar items in EconPapers)
Date: 2006-05
Note: 494827
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2006621

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