Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153228
Authors: 
Lombardi, Marco J.
Sgherri, Silvia
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 794
Abstract: 
Following the 2000 stockmarket crash, have US interest rates been held "too low" in relation to their natural level? Most likely, yes. Using a structural neo-Keynesian model, this paper attempts a real-time evaluation of the US monetary policy stance while ensuring consistency between the specification of price adjustments and the evolution of the econ- omy under flexible prices. To do this, the model's likelihood function is evaluated using a Sequential Monte Carlo algorithm providing inference about the time-varying distribution of structural parameters and unobservable, nonstationary state variables. Tracking down the evolution of underlying stochastic processes in real time is found crucial (i) to explain postwar Fed's policy and (ii) to replicate salient features of the data.
Subjects: 
Bayesian Analysis
DSGE Models
Natural Interest Rate
Particle Filters
JEL: 
E43
C11
C15
Document Type: 
Working Paper

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