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The dynamics of US inflation: Can monetary policy explain the changes?

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  • Fabio Canova

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  • Filippo Ferroni

Abstract

We investigate the relationship between monetary policy and inflation dynamics in the US using a medium scale structural model. The specification is estimated with Bayesian techniques and fits the data reasonably well. Policy shocks account for a part of the decline in inflation volatility; they have been less effective in triggering inflation responses over time and qualitatively account for the rise and fall in the level of inflation. A number of structural parameter variations contribute to these patterns.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1241.

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Date of creation: Jun 2010
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Handle: RePEc:upf:upfgen:1241

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Web page: http://www.econ.upf.edu/

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Keywords: New Keynesian model; Bayesian methods; Monetary policy; Inflation dynamics.;

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  16. Peter N. Ireland, 2000. "Money's Role in the Monetary Business Cycle," Boston College Working Papers in Economics, Boston College Department of Economics 458, Boston College Department of Economics.
  17. Fabio Canova & Luca Gambetti, 2007. "Do expectations matter? The Great Moderation revisited," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1084, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2009.
  18. Peter N. Ireland, 2000. "Sticky-Price Models of the Business Cycle: Specification and Stability," NBER Working Papers 7511, National Bureau of Economic Research, Inc.
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Cited by:
  1. Cristiano Cantore & Filippo Ferroni & Miguel A León-Ledesma, 2012. "Interpreting the Hours-Technology time-varying relationship," Studies in Economics, Department of Economics, University of Kent 1201, Department of Economics, University of Kent.
  2. Fabio Canova & Fernando J. Pérez Forero, 2012. "Estimating overidentified, nonrecursive, time-varying coefficients structural VARs," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1321, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Kemal Bagzibagli, 2012. "Monetary Transmission Mechanism and Time Variation in the Euro Area," Discussion Papers, Department of Economics, University of Birmingham 12-12, Department of Economics, University of Birmingham.
  4. Steffen Henzel & Elisabeth Wieland, 2013. "Synchronization and Changes in International Inflation Uncertainty," CESifo Working Paper Series 4194, CESifo Group Munich.
  5. Thomai Filippeli & Konstantinos Theodoridis, 2014. "DSGE Priors for BVAR Models," Working Papers, Queen Mary, University of London, School of Economics and Finance 713, Queen Mary, University of London, School of Economics and Finance.
  6. Gunnar Bårdsen & Luca Fanelli, 2013. "Frequentist evaluation of small DSGE models," Working Paper Series, Department of Economics, Norwegian University of Science and Technology 14113, Department of Economics, Norwegian University of Science and Technology.

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