Advanced Search
MyIDEAS: Login

Technology Shocks and Monetary Policy: Revisiting the Fed's Performance

Contents:

Author Info

  • SANVI AVOUYI-DOVI
  • JULIEN MATHERON

Abstract

Would the U.S. economy's dynamic response to permanent technology shocks have been different from the actual responses if monetary authorities' systematic response to these shocks had been optimal? To answer this question, we characterize the dynamic effects of permanent technology shocks and the way in which U.S. monetary authorities reacted to these shocks over the sample 1955(1)-2002(4) using a structural VAR. A sticky price-sticky wage model is developed and estimated to reproduce these responses. We then formally compare these responses with the outcome of the optimal monetary policy. Copyright 2007 The Ohio State University.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.0022-2879.2007.00033.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 39 (2007)
Issue (Month): 2-3 (03)
Pages: 471-507

as in new window
Handle: RePEc:mcb:jmoncb:v:39:y:2007:i:2-3:p:471-507

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
  2. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  3. Christopher J. Erceg & Dale W. Henderson & Andrew T. Levin, 1999. "Optimal monetary policy with staggered wage and price contracts," International Finance Discussion Papers 640, Board of Governors of the Federal Reserve System (U.S.).
  4. Ben S. Bernanke & Ilian Mihov, 1995. "Measuring monetary policy," Working Papers in Applied Economic Theory 95-09, Federal Reserve Bank of San Francisco.
  5. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
  6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  7. Anderson, Gary & Moore, George, 1985. "A linear algebraic procedure for solving linear perfect foresight models," Economics Letters, Elsevier, vol. 17(3), pages 247-252.
  8. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  9. Susanto Basu & John Fernald & Miles Kimball, 2004. "Are Technology Improvements Contractionary?," NBER Working Papers 10592, National Bureau of Economic Research, Inc.
  10. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Julio J. Rotemberg & Michael Woodford, 1999. "Interest Rate Rules in an Estimated Sticky Price Model," NBER Chapters, in: Monetary Policy Rules, pages 57-126 National Bureau of Economic Research, Inc.
  12. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
  13. Simon Gilchrist & John C. Williams, 1998. "Putty-clay and investment: a business cycle analysis," Finance and Economics Discussion Series 1998-30, Board of Governors of the Federal Reserve System (U.S.).
  14. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  15. Susanto Basu, 1994. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," NBER Working Papers 4817, National Bureau of Economic Research, Inc.
  16. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," NBER Working Papers 5809, National Bureau of Economic Research, Inc.
  17. Jean Boivin & Marc P. Giannoni, 2006. "Has Monetary Policy Become More Effective?," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 445-462, August.
  18. Dupaigne, M. & Fève, P. & Matheron, J., 2005. "Technology Shock and Employment: Do We Really Need DSGE Models with a Fall in Hours?," Working papers 124, Banque de France.
  19. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2005. "A critique of structural VARs using real business cycle theory," Working Papers 631, Federal Reserve Bank of Minneapolis.
  20. Michael Dotsey & Robert G. King, 2005. "Pricing, production, and persistence," Working Papers 05-4, Federal Reserve Bank of Philadelphia.
  21. Matheron, Julien & Maury, Tristan-Pierre, 2004. "Supply-side refinements and the New Keynesian Phillips Curve," Economics Letters, Elsevier, vol. 82(3), pages 391-396, March.
  22. Newey, Whitney K & West, Kenneth D, 1987. "Hypothesis Testing with Efficient Method of Moments Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 777-87, October.
  23. Amato, Jeffery D. & Laubach, Thomas, 2003. "Estimation and control of an optimization-based model with sticky prices and wages," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1181-1215, May.
  24. Martin Eichenbaum & Jonas D.M. Fisher, 2003. "Evaluating the Calvo model of sticky prices," Working Paper Series WP-03-23, Federal Reserve Bank of Chicago.
  25. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Inflation Targeting Rules," NBER Working Papers 9939, National Bureau of Economic Research, Inc.
  26. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations," IMF Working Papers 04/234, International Monetary Fund.
  27. Ramey, Valerie A & Francis, Neville, 2002. "Is The Technology-Driven Real Business Cycle Hypothesis Dead? Shocks and Aggregate Fluctuations Revisted," University of California at San Diego, Economics Working Paper Series qt6x80k3nx, Department of Economics, UC San Diego.
  28. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What Happens After a Technology Shock?," NBER Working Papers 9819, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Adjemian, Stéphane & Darracq Pariès, Matthieu & Moyen, Stéphane, 2008. "Towards a monetary policy evaluation framework," Working Paper Series 0942, European Central Bank.
  2. Sacht, Stephen & Franke, Reiner & Jang, Tae-Seok, 2013. "Moment Matching versus Bayesian Estimation: Backward-Looking Behaviour in a New-Keynesian Baseline Model," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79694, Verein für Socialpolitik / German Economic Association.
  3. Matheron, J. & Poilly, C., 2006. "How Well Does a Small Structural Model with Sticky Prices and Wages Fit Postwar U.S. Data?," Working papers 148, Banque de France.
  4. Frank Schorfheide, 2008. "DSGE model-based estimation of the New Keynesian Phillips curve," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 397-433.
  5. Carrillo, Julio A., 2012. "How well does sticky information explain the dynamics of inflation, output, and real wages?," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 830-850.
  6. Franke, Reiner & Jang, Tae-Seok & Sacht, Stephen, 2011. "Moment matching versus Bayesian estimation: Backward-looking behaviour in the new-Keynesian three-equations model," Economics Working Papers 2011,10, Christian-Albrechts-University of Kiel, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:39:y:2007:i:2-3:p:471-507. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.