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Structural Changes in the US Economy: Bad Luck or Bad Policy?

  • Canova, Fabio
  • Gambetti, Luca

This paper investigates the relationship between time variations in output and inflation dynamics and monetary policy in the US. There are changes in the structural coefficients and in the variance of the structural shocks. The policy rules in the 1970s and 1990s are similar as is the transmission of policy disturbances. Inflation persistence is only partly a monetary phenomena. Variations in the systematic component of policy have limited effects on the dynamics of output and inflation. Results are robust to alterations in the auxiliary assumptions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5457.

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Date of creation: Jan 2006
Date of revision:
Handle: RePEc:cpr:ceprdp:5457
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  1. Ben S. Bernanke & Ilian Mihov, 1995. "Measuring monetary policy," Working Papers in Applied Economic Theory 95-09, Federal Reserve Bank of San Francisco.
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  3. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  4. Eric M. Leeper & Tao Zha, 1999. "Modest policy interventions," FRB Atlanta Working Paper No. 99-22, Federal Reserve Bank of Atlanta.
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  9. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
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  12. Pivetta, Frederic & Reis, Ricardo, 2007. "The persistence of inflation in the United States," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1326-1358, April.
  13. Canova, Fabio, 1993. "Modelling and forecasting exchange rates with a Bayesian time-varying coefficient model," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 233-261.
  14. Hanson, Michael S., 2006. "Varying monetary policy regimes: A vector autoregressive investigation," Journal of Economics and Business, Elsevier, vol. 58(5-6), pages 407-427.
  15. Fabio Canova & Gianni De Nicolo, 2000. "Monetary disturbances matter for business fluctuations in the G-7," International Finance Discussion Papers 660, Board of Governors of the Federal Reserve System (U.S.).
  16. Luca Gambetti & Evi Pappa & Fabio Canova, 2005. "The structural dynamics of US output and inflation: What explains the changes?," Economics Working Papers 921, Department of Economics and Business, Universitat Pompeu Fabra.
  17. Thomas Sargent & Noah Williams & Tao Zha, 2009. "The Conquest of South American Inflation," Journal of Political Economy, University of Chicago Press, vol. 117(2), pages 211-256, 04.
  18. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  19. Koop, Gary, 1996. "Parameter uncertainty and impulse response analysis," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 135-149.
  20. Jeffrey A. Frankel, 1993. "On Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061546, June.
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