This paper explores optimal policy design in an estimated model of three small open economies: Australia, Canada and New Zealand. Within a class of generalized Taylor rules, we show that to stabilize a weighted objective of output consumer price inflation and nominal interest variation optimal...

In this paper we consider the implications of a fully specified dynamic general equilibrium model, developed by Smets and Wouters (2003). This is a relatively large-scale forward-looking model, which was shown to provide a good fit to the data. We show that systematically accounting for prior...

We take an agnostic view of the Phillips curve debate, and carry out an empirical investigation of the relative and absolute efficacy of Calvo sticky price (SP), sticky information (SI), and sticky price with indexation models (SPI), with emphasis on their ability to mimic inflationary dynamics....

This paper examines welfare-maximizing monetary policy in an estimated micro-founded general equilibrium model of the US economy where the policymaker faces uncertainty about model parameters. Uncertainty about parameters describing preferences and technology implies uncertainty about the...

We advance the proposition that dynamic stochastic general equilibrium (DSGE) models should not only be estimated and evaluated with full information methods. These require that the complete system of equations be specified properly. Some limited information analysis, which focuses upon specific...

Recent work suggests VAR models of output, inflation, and interest rates may be prone to instabilities. In the face of such instabilities, a variety of estimation or forecasting methods might be used to improve the accuracy of forecasts from a VAR. The uncertainty inherent in any single...