Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/56236 
Year of Publication: 
2003
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance No. 511
Publisher: 
Stockholm School of Economics, The Economic Research Institute (EFI), Stockholm
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

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