Contributing Authors
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Frontiers in Monetary Policy Research
The authors estimate the dynamic stochastic general equilibrium model of Christiano, Eichenbaum, and Evans (2005) on U.K. data. Their estimates suggest that price stickiness is a more important source of nominal rigidity in the United Kingdom than wage stickiness. Their estimates of parameters governing investment behavior are only well behaved when post-1979 observations are included, which reflects government policies until the late 1970s that obstructed the influence of market forces on investment.
Commentary on "An Estimated DSGE Model for the United Kingdom" by Riccardo DiCecio and Edward Nelson.
Linearized New Keynesian models and empirical no-arbitrage macro-finance models offer little insight regarding the implications of changes in bond term premiums for economic activity. This article investigates these implications using both a structural model and a reduced-form framework.
Commentary on "Macroeconomic Implications of Changes in the Term Premium" by Glenn D. Rudebusch, Brian P. Sack, and Eric T. Swanson.
The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price fluctuations.
Commentary on "Long-Run Risks and Financial Markets" by Ravi Bansal.
The authors examine the relationship between changes in short-term interest rates induced by monetary policy and the yields on long-maturity default-free bonds. The volatility of the long end of the term structure and its relationship with monetary policy are puzzling from the perspective of simple structural macroeconomic models.
Commentary on "Arbitrage-Free Bond Pricing with Dynamic Macroeconomic Models" by Michael F. Gallmeyer, Burton Hollifield, Francisco J. Palomino, and Stanley E. Zin.
Can monetary policy guide expectations toward desirable outcomes when equilibrium and welfare are sensitive to alternative, commonly held rational beliefs? This article studies this question in an exchange economy with endogenous debt limits in which dynamic complementarities between dated debt limits support two Pareto-ranked steady states: a suboptimal, locally stable autarkic state and a constrained optimal, locally unstable trading state. The authors identify feedback policies that reverse the stability properties of the two steady states and ensure rapid convergence to the constrained optimal state.
Commentary on "Monetary Policy as Equilibrium Selection" by Gaetano Antinolfi, Costas Azariadis, and James Bullard.
This article uses an example to show that a model that fits the available data perfectly may provide worse answers to policy questions than an alternative, imperfectly fitting model. The author argues that, in the context of Bayesian estimation, this result can be interpreted as being due to the use of an inappropriate prior over the parameters of shock processes.
Commentary on "Model Fit and Model Selection" by Narayana Kocherlakota.