Analysis of Various Shocks within the High-Frequency Versions of the Baseline New-Keynesian Model

Stephen Sacht

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: In this paper we analyze a hybrid small-scale New-Keynesian model with an arbitrary frequency of the agents synchronized decision making. We study the impact of various demand and supply shocks on the dynamics of the model variables. We show that the corresponding impulse-response functions of high-frequency versions of the model can qualitatively as well as quantitatively be fairly dissimilar from their quarterly counterparts. This can be explained by the decrease in the effectiveness of monetary policy responses to these shocks and the overall increase of inertia in the model variables. In particular, different kinds of frequency-dependent persistence effects occur, which dampen the pass-through of output gap movements into inflation rate dynamics as the period length decreases. The main conclusion is that DSGE modelling may be more sensitive to its choice of the agents decision interval.

JEL-codes: C63 C68 E52 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (2)

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Working Paper: Analysis of various shocks within the high-frequency versions of the baseline New-Keynesian model (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100372

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