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To: Tom Byron who wrote (33599)	5/10/1999 7:47:00 PM
From: long-gone	Read Replies (4) \| Respond to of 116779

Welcome to the Federal Reserve Bank of Cleveland Economic Research Department's Econpubs Announcement List May 1999 Edition Recent additions to our Web site include: Economic Working Paper Series 1998 Series \| 1997 Series \| 1996 Series 1999 Series Working Paper 9902 Taylor Rules in a Limited Participation Model By Lawrence J. Christiano and Christopher J. Gust We use the limited participation model of money as a laboratory for studying the operating characteristics of Taylor rules for setting the rate of interest. Rules are evaluated according to their ability to protect the economy from bad outcomes such as the burst of inflation observed in the 1970's. Based on our analysis, we argue for a rule which: (i) raises the nominal interest rate more than one-for-one with a rise in inflation; and (ii) does not change the interest rate in response to a change in output relative to trend. Working Paper 9901 Maximum Likelihood in the Frequency Domain: A Time to Build Example By Lawrence J. Christiano and Robert J. Vigfusson A well known result is that the Gaussian log-likelihood can be expressed as the sum over different frequency components. This implies that the likelihood ratio statistic has a similar linear decomposition. We exploit these observations to devise diagnostic methods that are useful for interpreting maximum likelihood parameter estimates and likelihood ratio tests. We apply the methods to the estimation and testing of two real business cycle models. The standard real business cycle model is rejected in favor of an alternative in which capital investment requires a planning period. clev.frb.org