Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64475
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dc.contributor.authorKiefer, Daviden_US
dc.date.accessioned2011-08-19en_US
dc.date.accessioned2012-09-28T12:40:20Z-
dc.date.available2012-09-28T12:40:20Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/64475-
dc.description.abstractCarlin and Soskice (2005) advocate a 3-equation model of stabilization policy, the IS-PC-MR model. Their third equation is the monetary reaction rule MR derived by assuming that governments have performance objectives, but are constrained by an augmented Phillips curve PC. Central banks achieve their preferred outcome by setting interest rates along an IS curve. We simplify their model to 2 equations (PC and MR), developing a state space econometric specification of this solution, and adding a random walk model of unobserved potential growth. Applying this model to a panel of North Atlantic countries, we find it historically consistent with an inflation target of about 4%. Significant interdependence is found in the between-country covariance of inflation and growth shocks, but not of potential output. Beginning with the approximation that expected inflation is the most recent observation, we extend the model to introduce alternative assumptions about expectations with mixed results, support for the stickyprice model, but doubts about activist policy.en_US
dc.language.isoengen_US
dc.publisher|aUniv. of Utah, Dep. of Economics |cSalt Lake City, Utahen_US
dc.relation.ispartofseries|aWorking Paper, University of Utah, Department of Economics |x2011-15en_US
dc.subject.jelE61en_US
dc.subject.jelE63en_US
dc.subject.ddc330en_US
dc.subject.keywordnew Keynesian policyen_US
dc.subject.keywordinflation targetsen_US
dc.subject.keywordexpectationsen_US
dc.titleStabilization and expectations in a state space model of interconnected economies, a dynamic panel studyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn666400598en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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