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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

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

Assessment



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