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Some International Evidence for Keynesian Economics Without the Phillips Curve

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  • Roger E.A. Farmer
  • Giovanni Nicolò

Abstract

Farmer and Nicolo (2018)… show that the Farmer Monetary (FM)‐model outperforms the three‐equation New Keynesian (NK)‐model in post‐war U.S. data. In this paper, we compare the marginal data density of the FM‐model with marginal data densities for determinate and indeterminate versions of the NK‐model for three separate samples using U.S., U.K. and Canadian data. We estimate versions of both models that restrict the parameters of the private sector equations to be the same for all three countries. Our preferred specification is the constrained version of the FM‐model which has a marginal data density that is more than 40 log points higher than the NK alternative. Our findings also demonstrate that cross‐country macroeconomic differences are well explained by the different shocks that hit each economy and by differences in the ways in which national central banks reacted to those shocks.

Suggested Citation

  • Roger E.A. Farmer & Giovanni Nicolò, 2021. "Some International Evidence for Keynesian Economics Without the Phillips Curve," Manchester School, University of Manchester, vol. 89(S1), pages 1-22, September.
    • Handle: RePEc:bla:manchs:v:89:y:2021:i:s1:p:1-22
    DOI: 10.1111/manc.12296
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    1. Farmer, Roger E.A. & Nicolò, Giovanni, 2018. "Keynesian economics without the Phillips curve," Journal of Economic Dynamics and Control, Elsevier, vol. 89(C), pages 137-150.
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    Cited by:

    1. Thibault Lemaire, 2020. "Phillips in A Revolution: Unemployment and Prices in Early 21st Century Egypt," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03948605, HAL.
    2. Francesco Bianchi & Giovanni Nicolo & Dongho Song, 2023. "Inflation and Real Activity over the Business Cycle," Finance and Economics Discussion Series 2023-038, Board of Governors of the Federal Reserve System (U.S.).
    3. Roger E A Farmer, 2020. "The importance of beliefs in shaping macroeconomic outcomes," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 36(3), pages 675-711.
    4. Roger E.A. Farmer, 2019. "The Indeterminacy School in Macroeconomics," NBER Working Papers 25879, National Bureau of Economic Research, Inc.
    5. Giovanni Nicolo, 2020. "Monetary Policy, Self-Fulfilling Expectations and the U.S. Business Cycle," Finance and Economics Discussion Series 2020-035, Board of Governors of the Federal Reserve System (U.S.).
    6. Pagan, Adrian & Robinson, Tim, 2022. "Excess shocks can limit the economic interpretation," European Economic Review, Elsevier, vol. 145(C).
    7. Jinshun Wu & Luyao Wu, 2024. "Bayesian Local Likelihood Estimation of Time-Varying DSGE Models: Allowing for Indeterminacy," Computational Economics, Springer;Society for Computational Economics, vol. 64(4), pages 2437-2476, October.
    8. Roger E A Farmer, 2019. "The Indeterminacy Agenda in Macroeconomics," National Institute of Economic and Social Research (NIESR) Discussion Papers 507, National Institute of Economic and Social Research.

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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F0 - International Economics - - General

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