Dynamic Specifications in Optimizing Trend-Deviation Macro Models
FRB of Kansas City Research Working Paper No. 01-03
32 Pages Posted: 11 Aug 2001
Date Written: July 2001
Abstract
As noted in surveys by Goodfriend and King (1997) and Walsh (1998) and exemplified by models analyzed in Taylor (1999), there is encouraging progress in developing optimizing trend-deviation macro models that provide useful insights into the transmission and design of monetary policy. Several controversial features of a minimalist trend-deviation model, with optimizing households, firms, and bond traders, are examined. Dynamic specifications are suggested to improve the data-based realism, while preserving the simplicity, of the minimalist model.
Keywords: New-Keynesian Macro Models, Optimizing IS, Phillips Curve, Time-Varying Term Premiums
JEL Classification: E3, E5
Suggested Citation: Suggested Citation
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