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Monetary Policy and Inflation Dynamics

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  • Roberts, John M

Abstract

Since the early 1980s, the U.S. economy has changed in some important ways: inflation now rises considerably less when unemployment is low, and the volatility of output and inflation have fallen sharply. This paper examines whether changes in monetary policy can account for these changes in the economy. The results suggest that changes in monetary policy can account for most or all of the change in the inflationunemployment relationship. In addition, changes in policy can explain a large proportion of the reduction in the volatility of the output gap.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 812.

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Date of creation: 06 Jul 2006
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Publication status: Published in International Journal of Central Banking Number 3.Volume(2006): pp. 193-230
Handle: RePEc:pra:mprapa:812

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  9. English William B. & Nelson William R. & Sack Brian P., 2003. "Interpreting the Significance of the Lagged Interest Rate in Estimated Monetary Policy Rules," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 3(1), pages 1-18, April.
  10. Rudebusch, Glenn D, 2005. "Assessing the Lucas Critique in Monetary Policy Models," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 37(2), pages 245-72, April.
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  13. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(1), pages 1-45, February.
  14. Andrew Levin & Volker Wieland & John C. Williams, 1998. "Robustness of simple monetary policy rules under model uncertainty," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-45, Board of Governors of the Federal Reserve System (U.S.).
  15. Orphanides, Athanasios & Porter, Richard D. & Reifschneider, David & Tetlow, Robert & Finan, Frederico, 2000. "Errors in the measurement of the output gap and the design of monetary policy," Journal of Economics and Business, Elsevier, Elsevier, vol. 52(1-2), pages 117-141.
  16. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 27(4), pages 975-84, November.
  17. Robert J. Gordon, 1980. "A Consistent Characterization of a Near-Century of Price Behavior," NBER Working Papers 0455, National Bureau of Economic Research, Inc.
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  19. David Reifschneider & Robert Tetlow & John Williams, 1999. "Aggregate disturbances, monetary policy, and the macroeconomy: the FRB/US perspective," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-19.
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