Persistence of shocks in an experimental dynamic stochastic general equilibrium economyxs

Charles N. Noussair, Damjan Pfajfar, Janos Zsiros

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

We design experimental economies based on a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. We apply shocks to tastes, productivity, and interest rate policy, and measure the persistence of these shocks. We find that, in a setting where goods are perfect substitutes, there is little persistence of output shocks compared to treatments with monopolistic competition, which perform similarly irrespective of whether or not menu costs are present. Discretionary central banking is associated with greater persistence than automated instrumental rules.

Original languageEnglish (US)
Pages (from-to)71-108
Number of pages38
JournalResearch in Experimental Economics
Volume17
DOIs
StatePublished - 2014
Externally publishedYes

Keywords

  • DSGE economy
  • Experimental Economics
  • Menu costs
  • Monetary policy

ASJC Scopus subject areas

  • Economics and Econometrics

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