Time-Consistency Problem and the Behavior of US Inflation from 1970 to 2008
AbstractThe restrictions implied by the theory of time-consistent monetary policy are imposed on empirical data. Model estimation is conducted using Bayesian Markov chain Monte Carlo techniques. We are able to identify two major regimes regarding the policy of the Federal Reserve from 1970 to 2008. Results show that the Federal Reserve places more weight on inflation stabilization throughout the bigger part of the 1980s and 1990s while on the other hand the Federal Reserve is pursuing a policy of placing more weight on its goals for unemployment reduction in the 1970s and from 2003 to 2008.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2013-25.
Date of creation: 08 2013
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Time-consistency; Monetary policy; Gibbs sampling;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-31 (All new papers)
- NEP-CBA-2013-08-31 (Central Banking)
- NEP-MAC-2013-08-31 (Macroeconomics)
- NEP-MON-2013-08-31 (Monetary Economics)
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