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Learning in a medium-scale DSGE model with expectations based on small forecasting models
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SYSNO ASEP 0376792 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title Learning in a medium-scale DSGE model with expectations based on small forecasting models Author(s) Slobodyan, Sergey (NHU-C) RID
Wouters, R. (BE)Source Title American Economic Journal: Macroeconomics. - : American Economic Association - ISSN 1945-7707
Roč. 4, č. 2 (2012), s. 65-101Number of pages 37 s. Language eng - English Country US - United States Keywords monetary-policy ; inflation ; convergence Subject RIV AH - Economics R&D Projects GCP402/11/J018 GA ČR - Czech Science Foundation (CSF) Institutional support NHU-C - PRVOUK-P23 UT WOS 000302552800003 DOI 10.1257/mac.4.2.65 Annotation This paper evaluates the empirical performance of a medium-scale DSGE model with agents forming expectations using small forecasting models updated by the Kalman filter. The adaptive learning model fits the data better than the rational expectations (RE) model. Beliefs about the inflation persistence explain the observed decline in the mean and the volatility of inflation as well as Phillips curve flattening. Learning about inflation results in lower estimates for the persistence of the exogenous shocks that drive price and wage dynamics in the RE version of the model. Expectations based on small forecasting models are closely related to the survey evidence on inflation expectations. Workplace Economics Institute - CERGE Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2013
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