Comparing New Keynesian Models in the Euro Area: A Bayesian Approach

FRB of Atlanta Working Paper No. 2003-30a

23 Pages Posted: 2 Dec 2003

See all articles by Pau Rabanal

Pau Rabanal

La Caixa

Juan Francisco Rubio-Ramirez

Federal Reserve Bank of Atlanta - Research Department

Date Written: February 2005

Abstract

This paper estimates and compares four versions of the sticky price New Keynesian model for the Euro area, using a Bayesian approach as described in Rabanal and Rubio-Ramírez (2003). The authors find that the average duration of price contracts is between four and eight quarters, similar to the one estimated in the United States, while price indexation is found to be smaller. On the other hand, average duration of wage contracts is estimated to between one and two quarters, lower than the one found for the United States, while wage indexation is higher. Finally, the marginal likelihood indicates that the sticky price and sticky wage model of Erceg, Henderson, and Levin (2002), its wage indexation variant, and the baseline sticky price model with price indexation have similar data explanation power while it positions the baseline sticky price model of Calvo at a lower level.

Keywords: nominal rigidities, indexation, Bayesian econometrics, model comparison

JEL Classification: C11, C15, E31, E32

Suggested Citation

Rabanal, Pau and Rubio-Ramirez, Juan Francisco, Comparing New Keynesian Models in the Euro Area: A Bayesian Approach (February 2005). FRB of Atlanta Working Paper No. 2003-30a, Available at SSRN: https://ssrn.com/abstract=464941 or http://dx.doi.org/10.2139/ssrn.464941

Pau Rabanal

La Caixa ( email )

Av Diagonal 629
Barcelona, 08028
Spain

Juan Francisco Rubio-Ramirez (Contact Author)

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8057 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.econ.umn.edu/~rubio

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
175
Abstract Views
1,429
Rank
309,447
PlumX Metrics