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When did unsystematic monetary policy have an effect on inflation?

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  • Mojon, Benoît

Abstract

An important stylized fact to emerge from the VAR estimates is that exogenous monetary policy shocks (also labelled unsystematic monetary policy) have a delayed, persistent, hump shaped effect on inflation. I argue that this empirical pattern is fragile. In particular it disappears when one corrects for the effects of large shifts (breaks) in average inflation or examines periods without such shifts (such as the 1984-2004 period). An important consequence is that the hump shaped VAR estimated response of inflation is not appropriate to fit stylised models of the response of inflation around a stable steady state inflation level. JEL Classification: E52

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0559.

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Date of creation: Dec 2005
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Handle: RePEc:ecb:ecbwps:20050559

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Keywords: Inflation Dynamics; Monetary policy transmission; VARs;

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References

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Citations

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Cited by:
  1. Martin Mandler, 2010. "Macroeconomic dynamics and inflation regimes in the U.S. Results from threshold vector autoregressions," MAGKS Papers on Economics 201012, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Mandler, Martin, 2012. "Inflation-regime dependent effects of monetary policy shocks. Evidence from threshold vector autoregressions," Economics Letters, Elsevier, vol. 116(3), pages 422-425.
  3. Martin Mandler, 2010. "Regime-dependent effects of monetary policy shocks. Evidence from threshold vector autoregressions," MAGKS Papers on Economics 201008, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Eric Monnet, 2012. "Monetary policy without interest rates. Evidence from France’s Golden Age (1948-1973) using a narrative approach," Working Papers 0032, European Historical Economics Society (EHES).

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