As both the natural level of output and the New Keynesian output gap cannot be observed in practice, there is quite some debate on the question how these variables look like in practice. Rather than taking the standard approach of using a time trend or the HP-filter to obtain estimates of these...

This paper tests the ability of popular New Keynesian models, which are traditionally used to study monetary policy and business cycles, to match the data regarding a key channel for monetary transmission: the dynamic interactions between macroeconomic variables and their corresponding...