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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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References

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  19. Fabio Canova & Luca Gambetti, 2003. "Structural changes in the US economy: is there a role for monetary policy?," Economics Working Papers 918, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2008.
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Citations

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

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