Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82478
Authors: 
Lindé, Jesper
Year of Publication: 
2001
Series/Report no.: 
Sveriges Riksbank Working Paper Series 130
Abstract: 
Recent research have provided evidence that backward-looking models fit the data well while purely forward-looking models seem to be inconsistent with data. Consequently, many recent papers in the monetary policy rule literature have used hybrid models, which contain both backward- and forward-looking components. In this paper, I demonstrate that a dynamic general equilibrium model with flexible prices and forward-looking properties cannot account for the empirical findings, i.e. that backward-looking behavior seems more important than forward-looking behavior, and that backward-looking models fit the data better than purely forward-looking models. The results also show that the equilibrium model cannot replicate the estimated high weight on backward-looking behavior on US data for the hybrid model.
Subjects: 
Monetary policy rules
New Keynesian Phillips-curves
Rational expectations IS-curves
Backward-looking models
Dynamic general equilibrium models
Lucas critique
JEL: 
C22
C52
E52
Document Type: 
Working Paper

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