Tuesday 13
C6 - Macroeconomics, Growth II
Chair: Jean-Bernard Chatelain
› 10:15 - 10:40 (25min)
› Room 104 - B. Bartok
Can we Identify the Fed's Preferences?
Jean-Bernard Chatelain  1, 2@  , Kirsten Ralf  3@  
1 : Paris School of Economics
Université Paris I Panthéon Sorbonne
2 : Université Paris 1 Panthéon Sorbonne, Centre d'Economie de la Sorbonne
Université Paris 1 Panthéon Sorbonne
3 : ESCE International Business School, 10 rue Sextius Michel, 75015 Paris

A pre-test of Ramsey optimal policy versus time-consistent policy rejects time-consistent policy and (optimal) simple rule for the U.S. Fed during 1960 to 2006, assuming the reference new-Keynesian Phillips curve transmission mechanism with cost-push shock. The number of reduced form parameters is larger with Ramsey optimal policy than with time-consistent policy although the number of structural parameters, including central bank preferences, is the same. At least one of the two models of policy is over-identified or under-identified. The new-Keynesian Phillips curve model is is under-identified with Ramsey optimal policy (one identifying equation missing) and hence under-identified for time-consistent policy (three identifying equations missing). Finally, estimating a structural VAR for Ramsey optimal policy during Volcker-Greenspan period, the new-Keynesian Phillips curve slope structural parameter and the Fed's preferences (weight of the volatility of the output gap) are not statistically different from zero at the 5% level.

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