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Monetary Policy Under Behavioral Expectations: An Empirical Validation of the Heuristic Switching Model
Bolshakov, Sergey ; Kukačka, Jiří (advisor) ; Kučera, Tomáš (referee)
This work takes one of the most prominent behavioral New-Keynesian models from the shelf and estimates it via the simulated method of moments. The model exhibits a remarkably good ft to the auto- and cross-covariance pro- fles of the euro area macroeconomic time series, especially compared to the standard rational expectations model. This result corroborates the claim that central banks which implement strict infation targeting are better of reacting to the output gap, on top of infation. JEL Classifcation E52, E70, D84, C53 Keywords Behavioral macroeconomics, heterogeneous ex- pectations, New-Keynesian model, Heuristic Switching Model, simulated method of moments Title Monetary Policy Under Behavioral Expecta- tions: An Empirical Validation of the Heuristic Switching Model
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