Abstract

http://ssrn.com/abstract=1416904
 
 

References (18)



 
 

Citations (2)



 


 



Reply to Generalizing the Taylor Principle: A Comment


Troy Davig


Federal Reserve Bank of Kansas City

Eric M. Leeper


Indiana University at Bloomington - Department of Economics; National Bureau of Economic Research (NBER); Monash University, Department of Economics

May 19, 2009

CAEPR Working Paper No. 008-2009

Abstract:     
Farmer, Waggoner, and Zha (2009) show that a new Keynesian model with a regime-switching monetary policy rule can support multiple solutions that depend only on the fundamental shocks in the model. Their note appears to find solutions in regions of the parameter space where there should be no bounded solutions, according to conditions in Davig and Leeper (2007). This puzzling finding is straightforward to explain: Farmer, Waggoner, and Zha (FWZ) derive solutions using a model that differs from the one to which the Davig and Leeper (DL) conditions apply. FWZ's multiple solutions rely on special assumptions about the correlation structure between fundamental shocks and policy regimes, blurring the distinction between "deep" parameters that govern behavior and the parameters that govern the exogenous shock processes, and making it difficult to ascribe any economic interpretation to FWZ's solutions.

Number of Pages in PDF File: 15

JEL Classification: E31, E52, C62

working papers series


Download This Paper

Date posted: June 12, 2009  

Suggested Citation

Davig, Troy and Leeper, Eric M., Reply to Generalizing the Taylor Principle: A Comment (May 19, 2009). CAEPR Working Paper No. 008-2009. Available at SSRN: http://ssrn.com/abstract=1416904 or http://dx.doi.org/10.2139/ssrn.1416904

Contact Information

Troy Davig (Contact Author)
Federal Reserve Bank of Kansas City ( email )
1 Memorial Dr.
Kansas City, MO 64198
United States
Eric Michael Leeper
Indiana University at Bloomington - Department of Economics ( email )
304 Wylie Hall
Bloomington, IN 47405-6620
United States
812-855-9157 (Phone)
812-855-3736 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Monash University, Department of Economics ( email )
Wellington Road
Clayton, Victoria 3168
Australia
Feedback to SSRN


Paper statistics
Abstract Views: 398
Downloads: 28
References:  18
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.469 seconds