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23
2003b), “Shocks and frictions in US business cycles: a Bayesian DSGE approach”, mimeo, European Central Bank
"... In 2007 all ECB publications feature a motif taken from the €20 banknote. This paper can be downloaded without charge from ..."
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Cited by 174 (3 self)
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In 2007 all ECB publications feature a motif taken from the €20 banknote. This paper can be downloaded without charge from
Monetary Policy under Uncertainty
 in MicroFounded Macroeconometric Models,” NBER Macroeconomics Annual
, 2005
"... We use a microfounded macroeconometric modeling framework to investigate the design of monetary policy when the central bank faces uncertainty about the true structure of the economy. We apply Bayesian methods to estimate the parameters of the baseline specification using postwar U.S. data and then ..."
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Cited by 133 (9 self)
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We use a microfounded macroeconometric modeling framework to investigate the design of monetary policy when the central bank faces uncertainty about the true structure of the economy. We apply Bayesian methods to estimate the parameters of the baseline specification using postwar U.S. data and then determine the policy under commitment that maximizes household welfare. We find that the performance of the optimal policy is closely matched by a simple operational rule that focuses solely on stabilizing nominal wage inflation. Furthermore, this simple wage stabilization rule is remarkably robust to uncertainty about the model parameters and to various assumptions regarding the nature and incidence of the innovations. However, the characteristics of optimal policy are very sensitive to the specification of the wage contracting mechanism, thereby highlighting the importance of additional research regarding the structure of labor markets and wage determination.
Firmspecific capital and the NewKeynesian Phillips curve
 International Journal of Central Banking. forthcoming
, 2005
"... A relation between inflation and the path of average marginal cost (often measured by unit labor cost) implied by the Calvo (1983) model of staggered pricing—sometimes referred to as the “New Keynesian ” Phillips curve—has been the subject of extensive econometric estimation and testing. Standard th ..."
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Cited by 18 (0 self)
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A relation between inflation and the path of average marginal cost (often measured by unit labor cost) implied by the Calvo (1983) model of staggered pricing—sometimes referred to as the “New Keynesian ” Phillips curve—has been the subject of extensive econometric estimation and testing. Standard theoretical justifications of this form of aggregatesupply relation, however, either assume (1) the existence of a competitive rental market for capital services, so that the shadow cost of capital services is equated across firms and sectors at all points in time, despite the fact that prices are set at different times, or (2) that the capital stock of each firm is constant, or at any rate exogenously given, and so independent of the firm’s pricing decision. But neither assumption is realistic. The present paper examines the extent to which existing empirical specifications and interpretations of parameter estimates are compromised by reliance on either of these assumptions. The paper derives an aggregatesupply relation for a model with monopolistic competition and Calvo pricing in which capital is firm specific and endogenous, and investment is subject to convex adjustment costs. The aggregatesupply relation is shown to again take the standard New Keynesian form, but with an elasticity of inflation with respect to real marginal cost that is a different function of underlying parameters than in the simpler cases studied earlier. Thus the relations estimated in the empirical literature remain correctly specified under the assumptions proposed here, but the interpretation of the estimated elasticity is different; in particular, the implications of the estimated Phillipscurve slope for the frequency of price ∗ I would like to thank Lutz Weinke for calling my attention to a mistake in my previous analysis of this model, Larry Christiano for helpful discussions,
Title: Endogenous Monetary Policy Regime Change
, 2006
"... Perhaps the most important advance in the monetary policy literature over the past twenty years is the explicit recognition that policy behavior is purposeful and responds endogenously to the state of the economy. Substantial progress has been made by research that examines ..."
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Cited by 8 (2 self)
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Perhaps the most important advance in the monetary policy literature over the past twenty years is the explicit recognition that policy behavior is purposeful and responds endogenously to the state of the economy. Substantial progress has been made by research that examines
The Quantitative Importance of News Shocks in Estimated DSGE Models” mimeo
, 2009
"... We estimate a dynamic stochastic general equilibrium (DSGE) model with several frictions and both unanticipated and news shocks, using quarterly US data from 19542004 and Bayesian methods. We find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of output, ..."
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Cited by 4 (0 self)
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We estimate a dynamic stochastic general equilibrium (DSGE) model with several frictions and both unanticipated and news shocks, using quarterly US data from 19542004 and Bayesian methods. We find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of output, consumption, investment, interest rate, and the relative price of investment. The unanticipated shock to the marginal efficiency of investment is the dominant shock, accounting for over 45 % of the variance of output growth. News shocks account for less than 15 % of the variance in output growth. Within the set of news shocks, nontechnology sources of news dominate technology news, with wage markup news shocks accounting for about 60 % of the variance share of both hours and inflation. We find that in the estimated DSGE model (a) the presence of endogenous countercyclical price and wage markups due to nominal frictions substantially diminishes the importance of news shocks relative to a model without these frictions, and (b) while there is little change in the estimated contributions of technology news when we restrict wealth effects on labour supply, the
News Shocks and the Slope of the Term Structure of Interest Rates.” Unpublished manuscript
"... We provide a new structural interpretation of the relationship between the slope of the term structure of interest rates and macroeconomic fundamentals. We first adopt an agnostic identification approach that allows us to identify the shocks that explain most of the movements in the slope. We find t ..."
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Cited by 3 (0 self)
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We provide a new structural interpretation of the relationship between the slope of the term structure of interest rates and macroeconomic fundamentals. We first adopt an agnostic identification approach that allows us to identify the shocks that explain most of the movements in the slope. We find that two shocks are sufficient to explain virtually all movements in the slope. Impulse response functions for the first shock, which explains 7090 percent of the movements in the slope, lead us to interpret this main shock as a news shock about future productivity. We confirm this interpretation by formally identifying such a news shock as in Barsky and Sims (2009) and Sims (2009). We then assess to what extent a New Keynesian DSGE model is capable of generating the observed slope responses to a news shock. We find that augmenting DSGE models with a term structure provides valuable information to discipline the description of monetary policy and the model’s response to news shocks in general.
Federal Reserve Bank of Minneapolis,
, 2008
"... Sluggish responses of prices and inflation to monetary shocks in an inventory model of money demand ∗ ..."
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Sluggish responses of prices and inflation to monetary shocks in an inventory model of money demand ∗
Macroeconomics Meeting, and the North American Summer Meeting of the Econometric Society for comments and
, 2008
"... This paper explores the effects of using alternative combinations of observables for the estimation of Dynamic Stochastic General Equilibrium (DSGE) models. I find that the estimation of structural parameters describing the Taylor rule and sticky contracts in prices and wages is particularly sensiti ..."
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This paper explores the effects of using alternative combinations of observables for the estimation of Dynamic Stochastic General Equilibrium (DSGE) models. I find that the estimation of structural parameters describing the Taylor rule and sticky contracts in prices and wages is particularly sensitive to the set of observables. In terms of the model’s predictions, the exclusion of some observables may lead to estimated parameters with unexpected outcomes, such as recessions following a positive technology shock. More importantly, three ways to assess different sets of observables are proposed. These measures favor a dataset consisting of 7 observables.
Bayesian estimation of a Dynamic General Equilibrium Model for the Polish economy
"... The paper presents the Bayesian estimation of a Dynamic General Equilibrium model for the Polish data. The structural parameters of the original model were calibrated and the model was used to in a context of accounting for the welfare cost of business cycles and investigating the monetary policy. ..."
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The paper presents the Bayesian estimation of a Dynamic General Equilibrium model for the Polish data. The structural parameters of the original model were calibrated and the model was used to in a context of accounting for the welfare cost of business cycles and investigating the monetary policy. This paper extends the previous analysis by applying the Bayesian methods to estimate all structural parameters and by illustrating the analysis with Polish data. Obtained results present the prior and posterior distributions of the parameters as well as parameters characterising shocks.