NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Technology Shocks in the New Keynesian Model

Peter N. Ireland

NBER Working Paper No. 10309
Issued in February 2004
NBER Program(s):   EFG

In the New Keynesian model, preference, cost-push, and monetary shocks all compete with the real business cycle model's technology shock in driving aggregate fluctuations. A version of this model, estimated via maximum likelihood, points to these other shocks as being more important for explaining the behavior of output, inflation, and interest rates in the postwar United States data. These results weaken the links between the current generation of New Keynesian models and the real business cycle models from which they were originally derived. They also suggest that Federal Reserve officials have often faced difficult trade-offs in conducting monetary policy.

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Document Object Identifier (DOI): 10.3386/w10309

Published: Peter N. Ireland, 2004. "Technology Shocks in the New Keynesian Model," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 923-936, 01.

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