A small New Keynesian state space model of the Australian economy

Author(s)
Leu, Shawn
Sheen, Jeffrey
Publication Date
2011
Abstract
Using a small New Keynesian state space macroeconomic model, we apply maximum likelihood estimation and the Kalman filter to obtain joint estimates of the unobservable medium-run paths of potential output and its normal rate of growth, the NAIRU, the neutral real interest rate and the subjective discount factor for Australia from 1984Q1 to 2006Q4. Using the estimated model we obtain dynamic forecasts for output, unemployment, and inflation to compare with the actual data from 2007Q1 to 2008Q4. Combining the estimated model with a monetary policy rule, we examine impulse responses of inflation and the output and unemployment gaps to shocks associated with the global financial crisis of 2008.
Citation
Economic Modelling, 28(1-2), p. 672-684
ISSN
1873-6122
0264-9993
Link
Publisher
Elsevier BV
Title
A small New Keynesian state space model of the Australian economy
Type of document
Journal Article
Entity Type
Publication

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