English, Article, Journal or magazine article edition: The New Keynesian Monetary Model: Does it Show the Comovement...?. Ramón María-Dolores; Jesús Vázquez

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The New Keynesian Monetary Model: Does it Show the Comovement...?.
Author
  • Ramón María-Dolores
  • Jesús Vázquez
Physical Description
  • preprint
Notes
  • This paper analyzes the performance of alternative versions of the New Keynesian monetary (NKM) model in order to replicate the comovement observed between output and inflation during the Greenspan era. Following Den Haan (2000), we analyze that comovement by computing the correlations of VAR forecast errors of the two variables at different forecast horizons. The empirical correlations obtained show a weak comovement. A simple NKM model under a standard parametrization provides a high negative comovement at any forecast horizon. However, a generalized version including habit formation and a forward-looking Taylor rule is able to mimic the observed weak comovement. The good performance of this generalized version also extends to the case in which the policymaker is committed to following an optimal contingent plan under certain parametrizations.
  • comovement, VAR forecast errors, NKMmodel, optimal policy
  • RePEc:ehu:dfaeii:200405
Language
  • English
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