Chapter 34
NEW ECONOMETRIC APPROACHES TO STABILIZATION
POLICY IN STOCHASTIC MODELS OF MACROECONOMIC
FLUCTUATIONS
JOHN B. TAYLOR*
Stanford University
Contents
1. Introduction
2. Solution concepts and techniques
2.1. Scalar models
2.2. Bivariate models
2.3. The use of operators, generating functions, and z-transforms
2.4. Higher order representations and factorization techniques
2.5 Rational expectations solutions as boundary value problems
3. Econometric evaluation of policy rules
3.1. Policy evaluation for a univariate model
3.2. The Lucas critique and the Cowles Commission critique
3.3. Game-theoretic approaches
4. Statistical inference
4.1. Full information estimation
4.2. Identification
4.3. Hypothesis testing
4.4. Limited information estimation methods
5. General linear models
5.1. A general first-order vector model
5.2. Higher order vector models
6. Techniques for nonlinear models
6.1. Multiple shooting method
6.2. Extended path method
6.3. Nonlinear saddle path manifold method
7. Concluding remarks
References