Discussion Paper

No. 2008-23 | May 21, 2008
Testing the New Keynesian Model on U.S. and Euro Area Data

Abstract

I apply the Johansen and Swensen (1999, 2004) method of testing exact rational expectations within the cointegrated VAR (Vector Auto-Regressive) model, to testing the New Keynesian (NK) model. This method permits the testing of rational expectation systems, while allowing for non-stationary data. The NK-model is tested on quarterly U.S. and Euro area time series data. I find that the restrictions implied by the core equations of the NK-model are rejected regardless of sample periods or measures of real marginal costs. I also provide a tentative explanation of the results favored by previous researches.

Paper submitted to the special issue “Using Econometrics for Assessing Economic Models” edited by Katarina Juselius

JEL Classification:

C32, C52, E31, E52

Assessment

Links

Cite As

Mikael Juselius (2008). Testing the New Keynesian Model on U.S. and Euro Area Data. Economics Discussion Papers, No 2008-23, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2008-23


Comments and Questions


Anonymous - Referee Report
June 10, 2008 - 11:13

see attached file


Mikael Juselius - Response to Referee Report
June 18, 2008 - 11:30

see attached file


Mikael Juselius - Revised Version of the Discussion Paper
June 18, 2008 - 11:31

see attached file


Anonymous - Referee Report
June 30, 2008 - 10:12

see attached file


Mikael Juselius - Response to Referee Report
July 03, 2008 - 14:12

see attached file


Mikael Juselius - Revised Version of the Discussion Paper
July 03, 2008 - 14:17

see attached file