Which parameters drive approximation inaccuracies?

This paper identifies parameters responsible for welfare reversals when the basic New Keynesian model is approximated. In our setting, a reversal occurs when the Ramsey policy under timeless perspective commitment ceases to be dominant against the Taylor rule after approximating the model. We find that the parameters involved are the degree of persistence in the autoregressive shock process and the labor elasticity of real output.

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Year of publication:	2010
Authors:	Sienknecht, Sebastian
Publisher:	Jena : Friedrich Schiller University Jena and Max Planck Institute of Economics
Subject:	Geldpolitik \| Zeit \| Wohlfahrtseffekt \| Neukeynesianische Makroökonomik \| Theorie \| optimal monetary policy \| approximations \| welfare analysis \| timeless perspective

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Series:	Jena Economic Research Papers ; 2010,093
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	642325413 [GVK] hdl:10419/56919 [Handle]
Classification:	E30 - Prices, Business Fluctuations, and Cycles. General ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Source:	EconStor

Persistent link: https://www.econbiz.de/10010281684