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Title:New-Keynesian models and monetary policy: A reexamination of the stylized facts PDF Logo
Authors:Söderström, Ulf
Söderlind, Paul
Vredin, Anders
Issue Date:2003
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 511
Abstract:Using an empirical New-Keynesian model with optimal discretionary monetary policy, we calibrate key parameters - the central bank's preference parameters; the degree of forward-looking behavior in the determination of inflation and output; and the variances of inflation and output shocks - to match some broad characteristics of U.S. data. Our preferred parameterizations all imply a small concern for output stability but a large preference for interest rate smoothing, and a small degree of forward-looking behavior in price-setting but a large degree of forward-looking in the determination of output. We provide some intuition for these results and discuss their consequences for practical monetary policy analysis.
Subjects:Interest rate smoothing
central bank objectives
forward-looking behavior
JEL:E52
E58
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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