Forecasting and Policy Making (Paper) - Center for Financial Studies

β
β
β
8
6
4
2
h π =0
0
0 0.5 1
ρ
8
6
4
2
h π =0
0
0 0.5 1
ρ
8
6
4
2
h π =0
0
0 0.5 1
ρ
8
6
4
2
Smets & Wouters model (CCTW version, reestimated)
h π =4
0
0 0.5 1
ρ
8
6
4
2
h π =4
0
0 0.5 1
ρ
8
6
4
2
h π =4
0
0 0.5 1
ρ
8
6
4
2
h π =8
0
0 0.5 1
ρ
8
6
4
2
8
6
4
2
h π =12
0
0 0.5 1
ρ
IMF model, reestimated
h π =8
0
0 0.5 1
ρ
8
6
4
2
h π =12
0
0 0.5 1
ρ
FRB/US model (linearized 2003 version)
8
6
4
2
h π =8
0
0 0.5 1
ρ
8
6
4
2
h π =12
0
0 0.5 1
ρ
8
6
4
2
h π =16
0
0 0.5 1
ρ
8
6
4
2
h π =16
0
0 0.5 1
ρ
8
6
4
2
h π =16
0
0 0.5 1
ρ
8
6
4
2
h π =20
0
0 0.5 1
ρ
8
6
4
2
h π =20
0
0 0.5 1
ρ
8
6
4
2
h π =20
0
0 0.5 1
ρ
Figure 23: The graphs show determinacy regions for different combinations of the inflation response coefficient β and the interest rate
smoothing coefficient ρ. The response to the output gap is zero (γ = 0). For each specification of the inflation forecast horizon (0, 4, 8, 12,
16 and 20 quarters), multiple equilibira occur for all combinations of the parameters α and ρ that lie outside of the shaded area.
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