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Wednesday, April 18, 2007

How to Fill All That Spare Time

This is what's been keeping me busy:


Click to enlarge

It's a simulated loss function for a New Keynesian model that allows for a delay between policy and the reaction of macroeconomic variables, e.g. as described by Woodford (each of the 441 nodes represents 25,000 simulations). The loss, which is a function of the variance of output and the variance of inflation in this particular case, is shown for various values of the parameters of the monetary policy rule including the classic Taylor rule values. If all goes according to plan, and it usually doesn't, I hope to have more to say about this soon.


Click to enlarge

    Posted by on Wednesday, April 18, 2007 at 01:17 AM in Economics | Permalink  TrackBack (0)  Comments (4)

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