Some International Evidence for Keynesian Economics Without the Phillips Curve
24 Pages Posted: 25 Jul 2019 Last revised: 21 Oct 2019
Date Written: 2019-05-29
Farmer and NicolÃ² (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 30 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: Bayesian Methods, General Equilibrium, Indeterminancy, International Business Cycles, Keynes, Monetary policy, Phillips Curve
JEL Classification: F42, E12, F44, E00, E52
Suggested Citation: Suggested Citation