Surprising comparative properties of monetary models: results from a new data base

  • In this paper we investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. We make use of a new data base of models designed for such investigations. We focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and Wouters (2007) model, and the Taylor (1993a) model. Although the three models differ in terms of structure, estimation method, sample period, and data vintage, we find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, the optimal monetary policy responses to other sources of economic fluctuations are widely different in the different models. We show that simple optimal policy rules that respond to the growth rate of output and smooth the interest rate are not robust. In contrast, policy rules with no interest rate smoothing and no response to the growth rate, as distinct from the level, of output are more robust. Robustness can be improved further by optimizing rules with respect to the average loss across the three models.

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Metadaten
Author:John B. Taylor, Volker WielandORCiDGND
URN:urn:nbn:de:hebis:30-72706
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2009,21
Series (Serial Number):CFS working paper series (2009, 21)
Document Type:Working Paper
Language:English
Year of Completion:2009
Year of first Publication:2009
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2009/12/02
Tag:DSGE Models; Macroeconomic Modelling; Model Comparison; Monetary Models; Monetary Policy Rules; Robustness
GND Keyword:USA; Geldtheorie; Wirtschaftsmodell
HeBIS-PPN:220218862
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C5 Econometric Modeling / C52 Model Evaluation and Selection
Licence (German):License LogoDeutsches Urheberrecht