Structural shocks and the comovements between output and interest rates
Stylized facts on U.S. output and interest rates have so far proved hard to match with simple DSGE models. I estimate covariances between output, nominal and real interest rate conditional on structural shocks, since such evidence has largely been lacking in previous discussions of the output-interest rate puzzle. Conditional on shocks to technology and monetary policy, the results square with simple models. Moreover, permanent inflation shocks accounted for the counter-cyclical and inversely leading behavior of the real rate during the Great Inflation (1959-1979). Over the Great Moderation (1982-2006), technology shocks were more dominant and the real rate has been pro-cyclical.
Year of publication: |
2010
|
---|---|
Authors: | Mertens, Elmar |
Published in: |
Journal of Economic Dynamics and Control. - Elsevier, ISSN 0165-1889. - Vol. 34.2010, 6, p. 1171-1186
|
Publisher: |
Elsevier |
Keywords: | Interest rates Business cycles Bandpass filter Structural VAR News shocks |
Saved in:
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