Replication Code for: "A Behavioral New Keynesian Model"
- Gabaix, Xavier (Harvard University)
AbstractThis paper analyzes how bounded rationality affects monetary and fiscal policy via an empirically-relevant enrichment of the New Keynesian model. It models agents' partial myopia towards distant atypical events using a new microfounded cognitive discounting parameter. Compared to the rational model: (i) there is no forward guidance puzzle; (ii) the Taylor principle changes — with passive monetary policy but enough myopia equilibria are determinate and economies stable; (iii) the zero lower bound is much less costly; (iv) price-level targeting is not optimal; (v) fiscal stimulus is effective; (vi) the model is neo-Fisherian in the long run, Keynesian in the short run.
Is version of
Gabaix, Xavier. “A Behavioral New Keynesian Model.” American Economic Review 110, no. 8 (August 2020): 2271–2327. https://doi.org/10.1257/aer.20162005.
- ID: 10.1257/aer.20162005 (DOI)
Update Metadata: 2021-01-06 | Issue Number: 1 | Registration Date: 2021-01-06