Journal
AMERICAN ECONOMIC REVIEW
Volume 94, Issue 1, Pages 190-217Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/000282804322970760
Keywords
-
Categories
Ask authors/readers for more resources
This paper considers a prototypical New Keynesian model, in which the equilibrium is undetermined if monetary policy is passive. The likelihood-based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations. We construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks. According to the estimated model, U.S. monetary policy post-1982 is consistent with determinacy, whereas the pre-Volcker policy is not. We find that before 1979 indeterminacy substantially altered the propagation of shocks.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available