Surprising Comparative Properties of Monetary Models: Results from a New Data Base

John Taylor and Volker Wieland

No 14849, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. We make use of a new data base of models designed for such investigations. We focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and Wouters (2007) model, and the Taylor (1993a) model. Although the three models differ in terms of structure, estimation method, sample period, and data vintage, we find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, the optimal monetary policy responses to other sources of economic fluctuations are widely different in the different models. We show that simple optimal policy rules that respond to the growth rate of output and smooth the interest rate are not robust. In contrast, policy rules with no interest rate smoothing and no response to the growth rate, as distinct from the level, of output are more robust. Robustness can be improved further by optimizing rules with respect to the average loss across the three models.

JEL-codes: C52 E30 E52 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published as August 2012, Vol. 94, No. 3, Pages 800-816 Posted Online July 19, 2011. (doi:10.1162/REST_a_00220) © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology Surprising Comparative Properties of Monetary Models: Results from a New Model Database John B. Taylor Stanford University and Hoover Institution Volker Wieland University of Frankfurt

Downloads: (external link)
http://www.nber.org/papers/w14849.pdf (application/pdf)

Related works:
Working Paper: Surprising comparative properties of monetary models: Results from a new data base (2009)
Working Paper: Surprising comparative properties of monetary models: Results from a new data base (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14849

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w14849

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().