òòò½Íø Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Short-Term Planning, Monetary Policy, and Macroeconomic Persistence
òòò½Íø Journal: Macroeconomics
vol. 14,
no. 4, October 2022
(pp. 174–209)
Abstract
We estimate a behavioral New Keynesian (NK) model in which households and firms plan over a finite horizon. The finite-horizon planning (FHP) model outperforms rational expectations versions of the NK model as well as other behavioral NK models. In the FHP model, households and firms are forward-looking in thinking about events over their planning horizon but are backward-looking regarding events beyond that point. This gives rise to substantial aggregate persistence without resorting to additional features such as habit persistence and price contracts indexed to lagged inflation.Citation
Gust, Christopher, Edward Herbst, and David López-Salido. 2022. "Short-Term Planning, Monetary Policy, and Macroeconomic Persistence." òòò½Íø Journal: Macroeconomics 14 (4): 174–209. DOI: 10.1257/mac.20200058Additional Materials
JEL Classification
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E52 Monetary Policy