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Abstract

Since the early 1980s, the U.S. economy has changed in some important ways: inflation now rises considerably less when unemployment is low, and the volatility of output and inflation have fallen sharply. This paper examines whether changes in monetary policy can account for these changes in the economy. The results suggest that changes in monetary policy can account for most or all of the change in the inflationunemployment relationship. In addition, changes in policy can explain a large proportion of the reduction in the volatility of the output gap.

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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 2 (2006)
Issue (Month): 3 (September)
Pages:

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Handle: RePEc:ijc:ijcjou:y:2006:q:3:a:6

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Find related papers by JEL classification:

• E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
• E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
• E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
• E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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