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Economia Aplicada 2011
The cross-correlation between output and nominal variables in new keynesian models calibrated to Brazil and the U.S.DOI: 10.1590/S1413-80502011000400001 Keywords: cross-correlation, new keynesian, nominal variables. Abstract: this paper investigates if the interaction between habit formation and a forward-looking taylor rule can mimic the observed dynamic correlations between output and nominal variables (inflation and interest rates) in brazil and in the u.s. i carry out the analysis in a new keynesian model under sticky price or sticky information. the empirical cross-correlation pattern, obtained from the data, for brazil is different from the u.s. pattern. for both countries, the models that i considered cannot replicate with a fair amount of accuracy the dynamic correlations between output and nominal variables, though sticky price models and sticky information models imply different propagation mechanisms for macroeconomic shocks.
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