NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Are State- and Time-Dependent Models Really Different?

Fernando Alvarez, Francesco Lippi, Juan Passadore

Chapter in NBER book NBER Macroeconomics Annual 2016, Volume 31 (2017), Martin Eichenbaum and Jonathan A. Parker, editors (p. 379 - 457)
Conference held April 15-16, 2016
Published in May 2017 by University of Chicago Press
© 2017 by the National Bureau of Economic Research
in NBER Book Series NBER Macroeconomics Annual

Yes, but only for large monetary shocks. In particular, we show that in a broad class of models where shocks have continuous paths, the propagation of a monetary impulse is independent of the nature of the sticky price friction when shocks are small. The propagation of large shocks instead depends on the nature of the friction: the impulse response of inflation to monetary shocks is independent of the shock size in time-dependent models, while it is non-linear in state-dependent models. We use data on exchange rate devaluations and inflation for a panel of countries over 1974-2014 to test for the presence of state dependent decision rules. We present some evidence of a non-linear effect of exchange rate changes on prices in a sample of flexible-exchange rate countries with low inflation. We discuss the dimensions in which this finding is robust and the ones in which it is not.

This chapter is no longer available for free download, since the book has been published. To obtain a copy, you must buy the book.
Order from Amazon.com

Machine-readable bibliographic record - MARC, RIS, BibTeX

This chapter first appeared as NBER working paper w22361, Are State and Time Dependent Models Really Different?, Fernando E. Alvarez, Francesco Lippi, Juan Passadore
Commentary on this chapter:
  Comment, John Leahy
  Comment, Greg Kaplan
  Discussion,
Users who downloaded this chapter also downloaded* these:
Alvarez, Lippi, and Passadore w22361 Are State and Time Dependent Models Really Different?
Leahy Comment on "Are State and Time Dependent Models Really Different?"
Jordà, Schularick, and Taylor Macrofinancial History and the New Business Cycle Facts
Beaudry, Galizia, and Portier Is the Macroeconomy Locally Unstable and Why Should We Care?
Kaplan Comment on "Are State and Time Dependent Models Really Different?"
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us