A Structural Estimation and Interpretation of the New Keynesian Macro Model
Seonghoon Cho () and
Antonio Moreno ()
No 14/03, Faculty Working Papers from School of Economics and Business Administration, University of Navarra
We formulate and solve a Rational Expectations New Keynesian macro model that implies non-linear cross-equation restrictions on the dynamics of inflation, the output gap and the Federal funds rate. Our maximum likelihood estimation procedure fully imposes these restrictions and yields asymptotic and small sample distributions of the structural parameters. We show how the structural parameters shape the responses of the macro variables to the structural shocks. While the point estimates imply that the Fed has been stabilizing inflation fluctuations since 1980, our econometric analysis suggests considerable uncertainty regarding the stance of the Fed against inflation.
JEL-codes: C32 E32 E52 (search for similar items in EconPapers)
Pages: 50 pages
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Persistent link: https://EconPapers.repec.org/RePEc:una:unccee:wp1403
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