Monetary Policy under Uncertainty in Micro-Founded Macroeconometric Models

Levin, Andrew T.; Onatski, Alexei; Williams, John C.; Williams, Noah

doi:10.1086/ma.20.3585423

Cited by 200 publications

(239 citation statements)

References 37 publications

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“…We set y w to 0.75, in light of the empirical evidence in Taylor (1999), Smets and Wouters (2003), Levin et al (2005), and Christiano et al (2005). These numbers are roughly in line with the values used in the literature on staggered wage-setting (e.g., Erceg et al, 2000;Sveen and Weinke, 2007).…”

Section: Article In Pressmentioning

confidence: 90%

“…See, among others, Galí and Gertler (1999), Sbordone (2002), Galí et al (2001Galí et al ( , 2003, Bils et al (2003), Bils and Klenow (2004), Klenow and Krystov (2005), Christiano et al (2005), Alvarez et al (2006), Dhyne et al (2005), Levin et al (2005), and Nakamura and Steisson (2007). These numbers also cover most of the values used in studies on indeterminacy (e.g., Carlstrom and Fuerst, 2005;Weinke, 2005, 2007;Kurozumi and Zandweghe, 2008).…”

Section: A Model With Staggered Pricesmentioning

confidence: 99%

“…With these values of the fundamental parameters at hand, we can start to search for the values of t p and t y that ensure a unique equilibrium. We search in the range ½0; 5 for t p and ½0; 1 for t y , which cover most of the empirical estimates of the two policy parameters (e.g., Taylor, 1993;de Brouwer and Ellis, 1998;Kozicki, 1999;Clarida et al, 2000;Orphanides, 2000;Levin et al, 2003Levin et al, , 2005. As Fig.…”

Section: A Model With Staggered Pricesmentioning

confidence: 99%

“…Habit persistence in preferences for consumption has been found an important component of a monetary transmission mechanism (e.g., Christiano et al, 2005), and policy inertia in the form of interest-rate smoothing has been considered a crucial ingredient in monetary policy practice (e.g., Sack, 1998;Kozicki, 1999;Clarida et al, 2000;Orphanides, 2000;Levin et al, 2003Levin et al, , 2005Christiano et al, 2005). We examine here how these features affect determinacy.…”

Section: The Effect Of Habit Persistence and The Role Of Policy Inertiamentioning

confidence: 99%

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Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment

Huang

Meng

Xue

2009

Journal of Economic Dynamics and Control

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a b s t r a c tWe show that, with endogenous investment, virtually all monetary policy rules that set a nominal interest rate in response solely to expected future inflation induce real indeterminacy in models with (i) staggered prices, (ii) staggered prices and staggered wages, and (iii) staggered prices, staggered wages, and firm-specific capital. In (i), policy's response to current output can help significantly in ensuring determinacy with an infinite labor supply elasticity, but little with empirically plausible labor supply elasticity. In (ii), responding to output always helps a great deal, though under low price stickiness and without capital adjustment cost it may call for a moderate response to output in order to ensure determinacy for a wide range of response to inflation. In (iii), even a tiny response to output can always render equilibrium determinate for a wide range of response to inflation.

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Section: Article In Pressmentioning

confidence: 90%

Section: A Model With Staggered Pricesmentioning

confidence: 99%

Section: A Model With Staggered Pricesmentioning

confidence: 99%

Section: The Effect Of Habit Persistence and The Role Of Policy Inertiamentioning

confidence: 99%

See 2 more Smart Citations

Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment

Huang

Meng

Xue

2009

Journal of Economic Dynamics and Control

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show abstract

“…As in the related literature (ACEL; and Levin et al, 2005), it is assumed that the government has access to lump-sum taxes and debt. Furthermore, the government consumes a stochastic fraction of output G t =S g,t Y t (Justiniano and Primiceri, 2008).…”

Section: Governmentmentioning

confidence: 99%

The implications of inflation in an estimated new Keynesian model

Guerrón‐Quintana

2011

Journal of Economic Dynamics and Control

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a b s t r a c tThis paper studies the steady state and dynamic consequences of inflation in an estimated dynamic stochastic general equilibrium model of the U.S. economy. It is found that 10 percentage points of inflation entail a steady state welfare cost as high as 13% of annual consumption. This large cost is mainly driven by staggered price contracts and price indexation. The transition from high to low inflation inflicts a welfare loss equivalent to 0.53% of annual consumption. The role of nominal/real frictions as well as that of parameter uncertainty is also addressed.

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What you match does matter: the effects of data on DSGE estimation

Guerrón‐Quintana

2010

J of Applied Econometrics

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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, two ways to assess different sets of observables are proposed. These measures favor a dataset consisting of seven observables. Copyright © 2009 John Wiley & Sons, Ltd.

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Monetary Policy under Uncertainty in Micro-Founded Macroeconometric Models

Cited by 200 publications

References 37 publications

Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment

Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment

The implications of inflation in an estimated new Keynesian model

What you match does matter: the effects of data on DSGE estimation

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