Developed economies have experienced slower growth since the 2008 Önancial crisis, creating fears of "secular stagnation." Rational expectations models have forward-looking bubble solutions, which could cause this; here we investigate the case of Japan. We show that a New Keynesian model with a...

It has been an "empirical consensus" that data from developed economies generally do not support the hypothesis of international risk-sharing, either in the form of full risk-pooling via state-contingent assets or in the form of uncovered interest parity enforced by trading non-contingent...

We set out Modern Monetary Theory (MMT) as a full DSGE model, and test it by indirect inference on post Financial Crisis US data, alongside a standard New Keynesian, NK, model. The MMT model is rejected, while the NK model has a high probability. We then evaluate replacing the Öscal and...

Maximum Likelihood (ML) shows both lower power and higher bias in small sample Monte Carlo experiments than Indirect Inference (II) and IIís higher power comes from its use of the model-restricted distribution of the auxiliary model coeffi cients (Le et al. 2016). We show here that IIís higher...

Considerable micro-level evidence suggests that price/wage contract durations fluctuate with the state of the economy, particularly inflation; nonetheless, macro-level evidence for this is scarce. We incorporate state-dependent price/wage setting into an open economy DSGE model to investigate...

Macroeconomic researchers use a variety of estimators to parameterise their models empirically. One such is FIML; another is a form of indirect inference we term "informal" under which data features are "targeted" by the model -i.e. parameters are chosen so that model-simulated features...

Since the channel for agents' expectations matters for the effectiveness of monetary policies, it is crucial for policy-makers to assess the degree to which economic agents are boundedly rational and understand how the bounded rationality affects the monetary rules in stabilising the economy. We...

This paper explores the economic impacts of the Bank of England's quantitative easing policy, implemented as a response to the global financial crisis. Using an open economy Dynamic Stochastic General Equilibrium (DSGE) model, we demonstrate that monetary policy can remain effective even when...

Monetary developments of recent decades began with much promise with inflation targeting by independent central banks; the financial crisis of 2007 ushered in a period of great monetary instability. There are lessons for a return to more stability. Central banks need to stabilize money supply...

A common practice in estimating parameters in DSGE models is to Önd a set that when simulated gets close to an average of certain data moments; the modelís simulated performance for other moments is then compared to the data for these as an informal test of the model. We call this procedure...