Macroeconomic regimes

L.T.M. Baele, G.R.J. Bekaert, S. Cho, K. Inghelbrecht, A. Moreno

Research output: Contribution to journalArticleScientificpeer-review

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Abstract

A New-Keynesian macro-model is estimated accommodating regime-switching behavior in monetary policy and macro-shocks. A key to our estimation strategy is the use of survey-based expectations for inflation and output. Output and inflation shocks shift to the low volatility regime around 1985 and 1990, respectively. Monetary policy experiences multiple shifts with an important role in shaping macro-volatility. New estimates of the onset and demise of the Great Moderation are provided and the relative role played by macro-shocks and monetary policy is quantified. The estimated rational expectations model exhibits indeterminacy in the mean-square stability sense, mainly due to passive monetary policy.
Original languageEnglish
Pages (from-to)51-71
JournalJournal of Monetary Economics
Volume70
DOIs
Publication statusPublished - Mar 2015

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Macroeconomics
Monetary policy
Inflation
Rational expectations models
Great moderation
Indeterminacy
Regime switching
New Keynesian
Switching behavior
Macro model

Keywords

  • Markov-switching (MS) DSGE models
  • survey expectations
  • great moderation
  • monetary policy
  • determinacy in MS DSGE models

Cite this

Baele, L. T. M., Bekaert, G. R. J., Cho, S., Inghelbrecht, K., & Moreno, A. (2015). Macroeconomic regimes. Journal of Monetary Economics, 70, 51-71. https://doi.org/10.1016/j.jmoneco.2014.09.003
Baele, L.T.M. ; Bekaert, G.R.J. ; Cho, S. ; Inghelbrecht, K. ; Moreno, A. / Macroeconomic regimes. In: Journal of Monetary Economics. 2015 ; Vol. 70. pp. 51-71.
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Baele, LTM, Bekaert, GRJ, Cho, S, Inghelbrecht, K & Moreno, A 2015, 'Macroeconomic regimes', Journal of Monetary Economics, vol. 70, pp. 51-71. https://doi.org/10.1016/j.jmoneco.2014.09.003

Macroeconomic regimes. / Baele, L.T.M.; Bekaert, G.R.J.; Cho, S.; Inghelbrecht, K.; Moreno, A.

In: Journal of Monetary Economics, Vol. 70, 03.2015, p. 51-71.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

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AU - Baele, L.T.M.

AU - Bekaert, G.R.J.

AU - Cho, S.

AU - Inghelbrecht, K.

AU - Moreno, A.

PY - 2015/3

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AB - A New-Keynesian macro-model is estimated accommodating regime-switching behavior in monetary policy and macro-shocks. A key to our estimation strategy is the use of survey-based expectations for inflation and output. Output and inflation shocks shift to the low volatility regime around 1985 and 1990, respectively. Monetary policy experiences multiple shifts with an important role in shaping macro-volatility. New estimates of the onset and demise of the Great Moderation are provided and the relative role played by macro-shocks and monetary policy is quantified. The estimated rational expectations model exhibits indeterminacy in the mean-square stability sense, mainly due to passive monetary policy.

KW - Markov-switching (MS) DSGE models

KW - survey expectations

KW - great moderation

KW - monetary policy

KW - determinacy in MS DSGE models

U2 - 10.1016/j.jmoneco.2014.09.003

DO - 10.1016/j.jmoneco.2014.09.003

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Baele LTM, Bekaert GRJ, Cho S, Inghelbrecht K, Moreno A. Macroeconomic regimes. Journal of Monetary Economics. 2015 Mar;70:51-71. https://doi.org/10.1016/j.jmoneco.2014.09.003