Dynamic Specifications in Optimizing Trend-Deviation Macro Models

Kozicki, Sharon; Tinsley, Peter A.

doi:10.2139/ssrn.278340

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Dynamic Specifications in Optimizing Trend-Deviation Macro Models

FRB of Kansas City Research Working Paper No. 01-03

32 Pages Posted: 11 Aug 2001

See all articles by Sharon Kozicki

Peter A. Tinsley

George Washington University; Birkbeck College, Univ. of London

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

Kozicki, Sharon and Tinsley, Peter A., Dynamic Specifications in Optimizing Trend-Deviation Macro Models (July 2001). FRB of Kansas City Research Working Paper No. 01-03, Available at SSRN: https://ssrn.com/abstract=278340 or http://dx.doi.org/10.2139/ssrn.278340