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Assessing sticky price models using the Burns and Mitchell approach
[journal article]
Abstract This paper evaluates sticky-price models using the methods proposed by Burns and Mitchell, focusing on the monetary aspects of the business cycle. Recent research has emphasised the responses of models to shocks at the expense its systematic component. Whereas sticky-price models have been successfu... view more
This paper evaluates sticky-price models using the methods proposed by Burns and Mitchell, focusing on the monetary aspects of the business cycle. Recent research has emphasised the responses of models to shocks at the expense its systematic component. Whereas sticky-price models have been successful at replicating impulse response functions from VARs, this paper highlights that they are unable to mimic the data for nominal variables. Moreover, the results are robust to the specification of the Phillips curve, including its backward-looking variant; calibrated values and the inclusion of fiscal policy shocks. Since being able to mimic the data is the lowest hurdle a model must pass, these results pose a challenge for sticky price models.... view less
Classification
Political Economy
Economic Policy
Free Keywords
New Keynesian Models; Business Cycles; Correlations; Burns and Mitchell
Document language
English
Publication Year
2008
Page/Pages
p. 1387-1397
Journal
Applied Economics, 40 (2008) 11
DOI
https://doi.org/10.1080/00036840600794363
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)