Seonghoon Cho

A Small-Sample Study of the New-Keynesian Macro Model

This paper presents a small-sample study of the three-equation-three variable New-Keynesian macro model. While the point estimates imply that the Fed has been stabilizing inflation fluctuations since 1980, our econometric analysis suggests considerable uncertainty regarding the stance of the Fed against inflation. The canonical New-Keynesian macro model is strongly rejected by the likelihood ratio test, but we propose the direction in which it needs to be modified in order to fit the data.

A Structural Estimation and Interpretation of the New Keynesian Macro Model

We formulate and solve a Rational Expectations New Keynesian macro model that implies non-linear cross-equation restrictions on the dynamics of inflation, the output gap and the Federal funds rate. Our maximum likelihood estimation procedure fully imposes these restrictions and yields asymptotic and small sample distributions of the structural parameters. We show how the structural parameters shape the responses of the macro variables to the structural shocks. While the point estimates imply that the Fed has been stabilizing inflation fluctuations since 1980, our econometric analysis suggests considerable uncertainty regarding the stance of the Fed against inflation.

Characterizing Markov-Switching Rational Expectations Models

Markov-switching rational expectations (MSRE) models can bring out fresh insights beyond what linear rational expectations (RE) models have done for macroeconomics as Davig and Leeper (2007) and Farmer, Waggoner and Zha (2009), among others, have noted and predicted. A lack of tractable methodological foundations, however, may have hindered researchers from uncovering the salient features of MSRE models. This paper improves the status quo to a level at which MSRE - inherently non-linear - models can be analyzed as easily and comprehensively as linear RE models. Specically, we provide a solution method, determinacy conditions, and an economic solution renement and completely characterize the set of RE equilibria for general MSRE models under determinacy and indeterminacy in the mean-square stability sense. These tasks are accomplished by simply solving a model forward and imposing the no-bubble condition for fundamental solutions. We apply our methodology to a New-Keynesian model subject to regime-switching in monetary policy and nd some unforeseen but intuitive determinacy results. Markov-switching in the private sector is also shown to deliver potentially rich dynamics.

Fixed points for multivalued mappings in b-metric spaces

The notion of generalized α-ψ-contraction multivalued mappings of Ćirić-Berinde type is introduced and some fixed point theorems for such mappings are established. An example is given. Mathematics Subject Classification: 47H10, 54H25

The Deaton Paradox in a Long Memory Context with Structural Breaks

This article contributes to the Permanent Income Hypothesis (PIH) and excess consumption smoothness debate in the context of fractional integration. We show that the excess consumption smoothness result is a consequence of the quarterly data frequency commonly employed in the empirical work. In fact, the I(1) hypothesis is rejected for the income process with monthly data in favour of a fractional integration order lower than 1. Moreover, if a structural break is taken into account, we observe a substantial reduction in the degree of consumption smoothness, especially after the break found in 1975.