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Technology Persistence and Monetary Policy

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  • Pancrazi, Roberto
  • Vukotic, Marija

Abstract

In this paper, by using several statistical tools, we provide evidence of increased persistence of the U.S. total factor productivity. In a forward-looking model, agentsí optimal behavior depends on the autocorrelation structure of the exogenous shocks. Since many monetary models are driven by exogenous technology shocks, we study the implications of a change in technology persistence on monetary policy using a New Keynesian framework. First, we analytically derive the interaction between the TFP persistence, monetary policy parameters, and output gap and ináation. Second, we show that change in the TFP persistence a§ects the optimal behavior of monetary policy.

Suggested Citation

  • Pancrazi, Roberto & Vukotic, Marija, 2012. "Technology Persistence and Monetary Policy," Economic Research Papers 270536, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:270536
    DOI: 10.22004/ag.econ.270536
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    2. Pancrazi, Roberto, 2015. "The heterogeneous Great Moderation," European Economic Review, Elsevier, vol. 74(C), pages 207-228.
    3. Michael Donadelli & Vahid Mojtahed & Antonio Paradiso, 2015. "Technological Progress, Investment Frictions and Business Cycle: New Insights from a Neoclassical Growth Model," Working Papers LuissLab 15119, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    4. Ellalee, Haider & Alali, Walid Y., 2018. "The Brexit Impact on Inward FDI in the UK," MPRA Paper 117510, University Library of Munich, Germany, revised 20 May 2018.
    5. Marta Arespa & Diego Gruber, 2016. "Product Quality and International Price Dynamics," UB School of Economics Working Papers 2016/340, University of Barcelona School of Economics.
    6. Curatola, Giuliano & Donadelli, Michael & Grüning, Patrick, 2015. "Matching the BRIC equity premium: A structural approach," Emerging Markets Review, Elsevier, vol. 22(C), pages 65-75.
    7. Alali, Walid Y. & Ellalee, Haider, 2018. "The Brexit Impact on Inward FDI in the UK," EconStor Preprints 274655, ZBW - Leibniz Information Centre for Economics.
    8. Philip Arestis & Michail Karoglou & Kostas Mouratidis, 2016. "Monetary Policy Preferences of the EMU and the UK," Manchester School, University of Manchester, vol. 84(4), pages 528-550, July.

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