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When did unsystematic monetary policy have an effect on inflation?

  • Mojon, Benoît

An important stylized fact to emerge from 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 examines periods without large shifts in the level of inflation (such as 1984-2005). An important consequence is that the hump-shaped VAR estimated response of inflation is not appropriate to fit stylized models of the response of inflation around a stable steady state inflation level.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 52 (2008)
Issue (Month): 3 (April)
Pages: 487-497

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Handle: RePEc:eee:eecrev:v:52:y:2008:i:3:p:487-497
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