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The Signal Extraction Problem Revisited: A Note on Its Impact on a Model of Monetary Policy (2010)
| Venue: | Macroeconomic Dynamics |
| Citations: | 3 - 0 self |
BibTeX
@ARTICLE{Keen10thesignal,
author = {Benjamin D. Keen},
title = {The Signal Extraction Problem Revisited: A Note on Its Impact on a Model of Monetary Policy},
journal = {Macroeconomic Dynamics},
year = {2010},
pages = {405--426}
}
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Abstract
This paper develops a dynamic stochastic general equilibrium (DSGE) model with sticky prices and sticky wages, where agents have imperfect information on the stance and direction of monetary policy. Agents respond by using Kalman filtering to unravel persistent and temporary monetary policy changes in order to form optimal forecasts of future policy actions. Our results show that a New Keynesian model with imperfect information and real rigidities can account for several key effects of an expansionary monetary policy shock: the hump-shaped increase in output, the delayed and gradual rise in inflation, and the fall in the nominal interest rate. JEL Classification: E31; E32; E52.
Keyphrases
monetary policy signal extraction problem imperfect information unravel persistent new keynesian model expansionary monetary policy shock jel classification several key effect sticky price dynamic stochastic general equilibrium future policy action hump-shaped increase sticky wage nominal interest rate real rigidity gradual rise temporary monetary policy change agent respond optimal forecast
