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Technology shocks and monetary policy : Revisiting the Fed's performance

  • Matheron, Julien
  • Avouyi-Dovi, Sanvi

Would the U.S. economy's dynamic response to permanent technology shocks have been different from the actual responses if monetary authorities' systematic response to these shocks had been optimal ? To answer this question, we characterize the dynamic effects of permanent technology shocks and the way in which U.S. monetary authorities reacted to these shocks over the sample 1955(1)-2002(4) using a structural VAR. A sticky price-sticky wage model is developed and estimated to reproduce these responses. We then formally compare these responses with the outcome of the optimal monetary policy.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5491.

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Date of creation: 2007
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Publication status: Published in Journal of money, credit and banking, 2007, Vol. 39, no. 2-3. pp. 471-507.Length: 36 pages
Handle: RePEc:dau:papers:123456789/5491
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