We formulate and solve a Rational Expectations New Keynesian macro model that implies non-linear cross-equation restrictions on the dynamics of inflation, the output gap and the Federal funds rate. Our maximum likelihood estimation procedure fully imposes these restrictions and yields asymptotic...

This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time-varying inflation target and the natural rate of output which are filtered from...

This paper presents a small-sample study of the three-equation-three variable New-Keynesian macro model. While the point estimates imply that the Fed has been stabilizing inflation fluctuations since 1980, our econometric analysis suggests considerable uncertainty regarding the stance of the Fed...

This paper contributes to the permanent income hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in empirical work. In fact,...

This article complements the structural New-Keynesian macro framework with a no-arbitrage term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time-varying markup and stochastic risk aversion. Term structure information helps to...

We formulate and solve a Rational Expectations New Keynesian macro model that implies non-linear cross-equation restrictions on the dynamics of inflation, the output gap and the Federal funds rate. Our maximum likelihood estimation procedure fully imposes these restrictions and yields asymptotic...

This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time varying inflation target and the natural rate of output which are filtered from...

This paper shows that the concept of Expectational stability (E-stability) in a multivariate framework is inherently model-dependent. Whereas a Rational Expectations equilibrium (REE) is subject to model-specific parameter restrictions from the economic model at hand, a perceived law of motion...

This paper generalizes the standard forward method of recursive substitution to a general class of linear rational expectations models with potentially multiple fundamental solutions. It is shown that the existence and uniqueness of the well-known forward solution are preserved in a general...

We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. We identify accommodating monetary policy before 1980, with activist monetary...