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Does Inflation Adjust Faster to Aggregate Technology Shocks than to Monetary Policy Shocks?

  • Luigi Paciello

    (EIEF)

This paper studies U.S. inflation adjustment speed to aggregate technology shocks and to monetary policy shocks in a medium size Bayesian VAR model. According to the model estimated on the 1959-2007 sample, inflation adjusts much faster to aggregate technology shocks than to monetary policy shocks. These results are robust to different identification assumptions and measures of aggregate prices. However, by separately estimating the model over the pre- and post-1980 periods, this paper further shows that inflation adjusts much faster to technology shocks than to monetary policy shocks in the post-1980 period, but not in the pre-1980 period.

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File URL: http://www.eief.it/files/2012/09/wp-17-does-inflation-adjust-faster-to-aggregate-technology-shocks-than-to-monetary-policy-shocks.pdf
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Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 0917.

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Length: 31 pages
Date of creation: 2009
Date of revision: Apr 2011
Handle: RePEc:eie:wpaper:0917
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  15. Luigi Paciello, 2009. "Monetary Policy and Price Responsiveness to Aggregate Shocks under Rational Inattention," EIEF Working Papers Series 0916, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2011.
  16. David E. Altig & Lawrence J. Christiano & Martin Eichenbaum & Jesper Linde, 2004. "Firm-specific capital, nominal rigidities, and the business cycle," Working Paper 0416, Federal Reserve Bank of Cleveland.
  17. Rochelle M. Edge & Thomas Laubach & John C. Williams, 2003. "The responses of wages and prices to technology shocks," Finance and Economics Discussion Series 2003-65, Board of Governors of the Federal Reserve System (U.S.).
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