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Technology shocks and monetary policy : Revisiting the Fed's performance

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  • Matheron, Julien
  • Avouyi-Dovi, Sanvi

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.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5491.

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Date of creation: 2007
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Publication status: Published in Journal of money, credit and banking, 2007, Vol. 39, no. 2-3. pp. 471-507.Length: 36 pages
Handle: RePEc:dau:papers:123456789/5491

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Keywords: Sticky prices and wages; Taylor rule; Optimal monetary policy;

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Cited by:
  1. Matheron, Julien & Poilly, Céline, 2009. "How well does a small structural model with sticky prices and wages fit postwar U.S. data?," Economic Modelling, Elsevier, vol. 26(1), pages 266-284, January.
  2. J. A. Carrillo, 2011. "How Well Does Sticky Information Explain the Dynamics of Inflation, Output, and Real Wages?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/724, Ghent University, Faculty of Economics and Business Administration.
  3. 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.
  4. 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.
  5. Adjemian, Stéphane & Darracq Pariès, Matthieu & Moyen, Stéphane, 2008. "Towards a monetary policy evaluation framework," Working Paper Series 0942, European Central Bank.
  6. 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.

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