Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/149993 
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Title: 

Can we Identify the Fed's Preferences?

The document was removed on behalf of the author(s)/ the editor(s).

Year of Publication: 
2017
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel und Hamburg
Abstract: 
A pre-test of Ramsey optimal policy versus time-consistent policy rejects time-consistent policy and (optimal) simple rule for the U.S. Fed during 1960 to 2006, assuming the reference new-Keynesian Phillips curve transmission mechanism with auto-correlated cost-push shock. The number of reduced form parameters is larger with Ramsey optimal policy than with time-consistent policy although the number of structural parameters, including central bank preferences, is the same. The new-Keynesian Phillips curve model is under-identified with Ramsey optimal policy (one identifying equation missing) and hence under-identified for time-consistent policy (three identifying equations missing). Estimating a structural VAR for Ramsey optimal policy during Volcker-Greenspan period, the new-Keynesian Phillips curve slope parameter and the Fed's preferences (weight of the volatility of the output gap) are not statistically different from zero at the 5% level.
Subjects: 
Ramsey optimal policy
Time-consistent policy
Identification
Central bank preferences
New-Keynesian Phillips curve
JEL: 
C61
C62
E52
E58
Document Type: 
Preprint

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The document was removed on behalf of the author(s)/ the editor(s) on: September 18, 2017


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