Monetary Policy Rules and the Persistence of Inflation and Output
This paper argues that the parameters of monetary policy rules affect the persistence of inflation and output. Persistence is lower if monetary policy emphasises the price level or if there is an inflation target. A greater emphasis on output increases persistence. There is a simple New Keynesian interpretation of our findings: monetary policy rules affect persistence by affecting real rigidities.
|Date of creation:||Sep 2002|
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