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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, 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.
  2. Franke, Reiner & Jang, Tae-Seok & Sacht, Stephen, 2012. "Moment matching versus Bayesian estimation: Backward-looking behaviour in a New-Keynesian baseline model," Economics Working Papers 2012-08, Christian-Albrechts-University of Kiel, Department of Economics.
  3. Carrillo Julio A., 2010. "How Well Does Sticky Information Explain Inflation and Output Inertia?," Research Memorandum 018, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  4. Adjemian, Stéphane & Darracq Pariès, Matthieu & Moyen, Stéphane, 2008. "Towards a monetary policy evaluation framework," Working Paper Series 0942, European Central Bank.
  5. 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.
  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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