Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128032
Authors: 
Mertens, Elmar
Year of Publication: 
2005
Series/Report no.: 
Working Paper, Study Center Gerzensee 05.05
Abstract: 
Stylized facts on U.S. output and interest rates have so far proved hard to match with simple DSGE models. I estimate covariances between output, nominal and real interest rate conditional on structural shocks, since such evidence has largely been lacking in previous discussions of the output-interest rate puzzle. Conditional on shocks to technology and monetary policy, the results square with simple models. Moreover, permanent inflation shocks accounted for the counter-cyclical and inversely leading behavior of the real rate during the Great Inflation (1959-1979). Over the Great Moderation (1982-2006), technology shocks were more dominant and the real rate has been pro-cyclical.
Subjects: 
Interest Rates
Business Cycles
Bandpass Filter
Structural VAR
News Shocks
Document Type: 
Working Paper

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