Evolving UK and US macroeconomic dynamics through the lens of a model of deterministic structural change
AbstractUsing a model of deterministic structural change, we revisit several topics in inflation dynamics explored previously using stochastic, time-varying parameter models. We document significant reductions in inflation persistence and predictability. We estimate that changes in the volatility of shocks were decisive in accounting for the great moderations of the United States and the United Kingdom. We also show that the magnitude and the persistence of the response of inflation and output to monetary policy shocks has fallen in these two countries. These findings should be of interest in those seeking to resolve theoretical debates about the sources of apparent nominal and real frictions in the macroeconomy, and the causes of the Great Moderation.
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Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 434.
Length: 63 pages
Date of creation: 28 Jul 2011
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- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-09 (All new papers)
- NEP-CBA-2011-08-09 (Central Banking)
- NEP-MON-2011-08-09 (Monetary Economics)
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