How Well Does the New Keynesian Sticky-Price Model Fit the Data?
Abstract
A number of hypotheses have been proposed to account for the role of lagged inflation in the New Keynesian price-adjustment model: (1) In the aftermath of abrupt structural change, rational learning may appear adaptive. (2) The model may have a serially correlated error term. (3) Estimating the model conditional on labor costs may remove or reduce the need for lagged inflation. I address the empirical support for these hypotheses and find that...
Paper Details
Title
How Well Does the New Keynesian Sticky-Price Model Fit the Data?
Published Date
Sep 20, 2005
Journal
Volume
5
Issue
1
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