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On Modeling the Effects of Inflation Shocks: Comments and Some Further Evidence
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Paolo Giordani
Published/Copyright:
January 9, 2003
Fair (2002) argues that New Keynesian models are wrong in predicting that an inflation shock has contractionary effects only if it raises the real interest rate, and that a coefficient on inflation higher than one in the Taylor rule is a necessary condition for stability. While Fair uses his macroeconometric model as a benchmark to evaluate the predictions of the standard New Keynesian framework, we adopt a VAR supported by models in that framework, and the model of Rudebusch and Svensson (1999). The findings are broadly in line with Fair's.
Published Online: 2003-1-9
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Balance of Payments Constrained Non-Scale Growth and the Population Puzzle
- The Human Capital Constraint: Of Increasing Returns, Education Choice and Coordination Failure
- ``To Furnish an Elastic Currency'': Banking, Aggregate Risk, and Welfare
- How Prudent are Community Representative Consumers?
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- The Politics of Endogenous Growth
- Sticky Prices, Coordination and Enforcement
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