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The dynamics of US inflation: Can monetary policy explain the changes?

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  • Canova, Fabio
  • Ferroni, Filippo

Abstract

We investigate the relationship between monetary policy and inflation dynamics in the US using a medium scale structural model. The specification is estimated with Bayesian techniques and fits the data reasonably well. Policy shocks account for a part of the decline in inflation volatility; they have been less effective in triggering inflation responses over time and qualitatively account for the rise and fall in the level of inflation. A number of structural parameter variations contribute to these patterns.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 167 (2012)
Issue (Month): 1 ()
Pages: 47-60

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Handle: RePEc:eee:econom:v:167:y:2012:i:1:p:47-60

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Web page: http://www.elsevier.com/locate/jeconom

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Keywords: New Keynesian model; Bayesian methods; Monetary policy; Inflation dynamics;

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  1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February.
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Citations

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Cited by:
  1. Gunnar Bårdsen & Luca Fanelli, 2013. "Frequentist evaluation of small DSGE models," Working Paper Series 14113, Department of Economics, Norwegian University of Science and Technology.
  2. Steffen Henzel & Elisabeth Wieland, 2013. "Synchronization and Changes in International Inflation Uncertainty," CESifo Working Paper Series 4194, CESifo Group Munich.
  3. Fabio Canova & Fernando J. Pérez Forero, 2012. "Estimating overidentified, nonrecursive, time-varying coefficients structural VARs," Economics Working Papers 1321, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Thomai Filippeli & Konstantinos Theodoridis, 2014. "DSGE Priors for BVAR Models," Working Papers 713, Queen Mary, University of London, School of Economics and Finance.
  5. Cantore, C. & Ferroni, F. & León-Ledesma, M A., 2011. "Interpreting the Hours-Technology time-varying relationship," Working papers 351, Banque de France.
  6. Kemal Bagzibagli, 2012. "Monetary Transmission Mechanism and Time Variation in the Euro Area," Discussion Papers 12-12, Department of Economics, University of Birmingham.

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