A Structural Estimation and Interpretation of the New Keynesian Macro Model

Download or read book A Structural Estimation and Interpretation of the New Keynesian Macro Model written by Seonghoon Cho and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We formulate and solve a Rational Expectations New Keynesian macro model that implies non-linear cross-equation restrictions on the dynamics of inflation, the output gap and the Federal funds rate. Our maximum likelihood estimation procedure fully imposes these restrictions and yields asymptotic and small sample distributions of the structural parameters. We show how the structural parameters shape the responses of the macro variables to the structural shocks. While the point estimates imply that the Fed has been stabilizing inflation fluctuations since 1980, our econometric analysis suggests considerable uncertainty regarding the stance of the Fed against inflation.