Essays on the Econometric Evaluation of Monetary Business Cycle Models

Download or read book Essays on the Econometric Evaluation of Monetary Business Cycle Models written by Frédo Jean-Baptiste and published by . This book was released on 2011 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis focuses on the econometric evaluation of the new-Keynesian model. This model is now a benchmark one for the analysis of monetary policy, both in academic and policy-making institutions. This dissertation fits the new-Keynesian model to U.S. and European data, and the model is evaluated on its ability in matching inflation persistence, in explaining the Great Moderation, i.e. the idea that economic data after 1980 until the Great Recession of 2008 are more stable than before. Finally, the estimated model is used to shed light on whether changes in U.S. and European monetary policy are endogenous or not. Our results are as follows. First, the estimated model matches inflation persistence as soon as the new-Keynesian Phillips curve includes the inflation target of the central bank as a variable that explains inflation. Second, the explanations for the Great Moderation are both an improved monetary policy and smaller variance of shocks that U.S. and European economy have experienced. Third, changes in European monetary policy appear to be endogenous, while changes in U.S. monetary policy are closely associated with the dates at which Fed Chairmen change.