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Reproducing the results in “Does the time-consistency problem explain the behavior of inflation in the United States?” using the Metropolis–Hastings algorithm

Author

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  • Nima Nonejad

    (Aalborg University
    CREATES)

Abstract

The study of Ireland (J Monet Econ 44:279–291, 1999) derives the restrictions imposed by Barro and Gordon’s theory of time-consistent monetary policy on a bivariate time-series model for US inflation and unemployment rate. The model is then estimated via maximum likelihood techniques using quarterly data from 1960q1 to 1997q2. In this study, we reproduce the central results of Ireland (1999) using the Metropolis–Hastings algorithm. Although we apply Bayesian instead of classical estimation, posterior parameter estimates are similar to maximum likelihood parameter estimates reported in Ireland (1999).

Suggested Citation

  • Nima Nonejad, 2020. "Reproducing the results in “Does the time-consistency problem explain the behavior of inflation in the United States?” using the Metropolis–Hastings algorithm," Empirical Economics, Springer, vol. 59(5), pages 2559-2571, November.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:5:d:10.1007_s00181-019-01778-2
    DOI: 10.1007/s00181-019-01778-2
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    References listed on IDEAS

    as
    1. Joshua C. C. Chan & Angelia L. Grant, 2016. "On the Observed-Data Deviance Information Criterion for Volatility Modeling," Journal of Financial Econometrics, Oxford University Press, vol. 14(4), pages 772-802.
    2. Ireland, Peter N., 1999. "Does the time-consistency problem explain the behavior of inflation in the United States?," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 279-291, October.
    3. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    4. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Inflation; Monetary policy; Metropolis–Hastings; Time-consistency;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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    1. Reproducing the results in “Does the time-consistency problem explain the behavior of inflation in the United States?” using the Metropolis–Hastings algorithm (Emp Econ 2020) in ReplicationWiki

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