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Structural changes in the US economy: Is there a role for monetary policy?

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  • Canova, Fabio
  • Gambetti, Luca

Abstract

This paper investigates the contribution of monetary policy to the changes in output growth and inflation dynamics in the US. We identify a policy shock and a policy rule in a time-varying coefficients VAR using robust sign restrictions. The transmission of policy shocks has been relatively stable. The variance of the policy shock has decreased over time, but policy shocks account for a small fraction of the level and the variations in inflation and output growth volatility and persistence. Finally we find little evidence of a significant increase in the long run response of the interest rate to inflation.

Suggested Citation

  • Canova, Fabio & Gambetti, Luca, 2009. "Structural changes in the US economy: Is there a role for monetary policy?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 477-490, February.
  • Handle: RePEc:eee:dyncon:v:33:y:2009:i:2:p:477-490
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    More about this item

    Keywords

    Monetary policy Inflation persistence Transmission of shocks Time-varying coefficients structural VARs;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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