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When did unsystematic monetary policy have an effect on inflation?

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Author Info
Benoît Mojon () (European Central Bank, Postfach 160319, 60066 Frankfurt am Main, Germany)

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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.

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Publisher Info
Paper provided by European Central Bank in its series Working Paper Series with number 559.

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Length: 45 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:ecb:ecbwps:20050559

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Related research
Keywords: Monetary policy transmission; VARs; inflation dynamics;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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