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Comparing U.S. Monetary Policy Effectiveness in the Pre- and Post-Pandemic Periods

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  • Jihye Ahn

Abstract

This study investigates structural changes in U.S. monetary policy effectiveness before and after the COVID-19 pandemic by analyzing the dynamic responses of key macroeconomic variables – personal consumption expenditures, industrial production, long-term interest rate, and the shadow short rate (SSR) – to monetary policy shocks using local projection methods, over the period from January 2016 to August 2025. This study reveals that in the pre-pandemic period, before March 2020, contractionary monetary policy shocks lead to conventional and statistically significant effects: declines in inflation rate and output growth, and temporary increases in long-term interest rates, reflecting effective monetary policy. In the post-pandemic period, after March 2020, responses are muted and largely statistically insignificant, indicating a weakened monetary policy effectiveness. Furthermore, counterfactual simulations that remove monetary policy shocks after March 2020 confirm that monetary policy continues to support real activity and financial conditions. Overall, the findings highlight structural changes in the U.S. monetary policy effectiveness under unpredictable economic circumstances.

Suggested Citation

  • Jihye Ahn, 2026. "Comparing U.S. Monetary Policy Effectiveness in the Pre- and Post-Pandemic Periods," International Economic Journal, Taylor & Francis Journals, vol. 40(1), pages 46-56, January.
    • Handle: RePEc:taf:intecj:v:40:y:2026:i:1:p:46-56
    DOI: 10.1080/10168737.2025.2598206
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