Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/64475 
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dc.contributor.authorKiefer, Daviden
dc.date.accessioned2011-08-19-
dc.date.accessioned2012-09-28T12:40:20Z-
dc.date.available2012-09-28T12:40:20Z-
dc.date.issued2011-
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
dc.language.isoengen
dc.publisher|aThe University of Utah, Department of Economics |cSalt Lake City, UTen
dc.relation.ispartofseries|aWorking Paper |x2011-15en
dc.subject.jelE61en
dc.subject.jelE63en
dc.subject.ddc330en
dc.subject.keywordnew Keynesian policyen
dc.subject.keywordinflation targetsen
dc.subject.keywordexpectationsen
dc.titleStabilization and expectations in a state space model of interconnected economies, a dynamic panel study-
dc.typeWorking Paperen
dc.identifier.ppn666400598en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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