Some International Evidence for Keynesian Economics Without the Phillips Curve

25 Pages Posted: 9 Apr 2019 Last revised: 10 Jun 2019

See all articles by Roger E. A. Farmer

Roger E. A. Farmer

University of California, Los Angeles (UCLA) - Department of Economics; University of Warwick; National Institute of Economic and Social Research (NIESR); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Giovanni Nicolò

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: April 2019

Abstract

Farmer and Nicolò (2018) show that the Farmer Monetary (FM)-Model outperforms the three-equation New-Keynesian (NK)-model in post -war U.S. data. In this paper, we compare the marginal data density of the FM-model with marginal data densities for determinate and indeterminate versions of the NK-model for three separate samples using U.S., U.K. and Canadian data. We estimate versions of both models that restrict the parameters of the private sector equations to be the same for all three countries. Our preferred specification is the constrained version of the FM-model which has a marginal data density that is more than 40 log points higher than the NK alternative. Our findings also demonstrate that cross-country macroeconomic differences are well explained by the different shocks that hit each economy and by differences in the ways in which national central banks reacted to those shocks.

Keywords: belief function, Indeterminacy, Keynesian economics, Phillips curve

JEL Classification: E3, E4, F0

Suggested Citation

Farmer, Roger E.A. and Nicolò, Giovanni, Some International Evidence for Keynesian Economics Without the Phillips Curve (April 2019). CEPR Discussion Paper No. DP13655. Available at SSRN: https://ssrn.com/abstract=3368153

Roger E.A. Farmer (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

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University of Warwick ( email )

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United Kingdom

HOME PAGE: http://Rogerfarmer.com

National Institute of Economic and Social Research (NIESR) ( email )

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HOME PAGE: http://NIESR.ac.uk

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Giovanni Nicolò

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

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