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The dynamics of US inflation: Can monetary policy explain the changes?

  • Fabio Canova
  • Filippo Ferroni

We investigate the relationship between monetary policy and inflation dynamics in the US using a medium scale structural model. The specification is estimated with Bayesian techniques and fits the data reasonably well. Policy shocks account for a part of the decline in inflation volatility; they have been less effective in triggering inflation responses over time and qualitatively account for the rise and fall in the level of inflation. A number of structural parameter variations contribute to these patterns.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1241.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1241.

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Date of creation: Jun 2010
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Handle: RePEc:upf:upfgen:1241
Contact details of provider: Web page: http://www.econ.upf.edu/

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  12. Canova, Fabio & Gambetti, Luca, 2009. "Structural changes in the US economy: Is there a role for monetary policy?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 477-490, February.
  13. Yongsung Chang & Taeyoung Doh & Frank Schorfheide, 2006. "Non-stationary hours in a DSGE model," Working Papers 06-3, Federal Reserve Bank of Philadelphia.
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  18. Jordi Gali & Luca Gambetti, 2008. "On the Sources of the Great Moderation," NBER Working Papers 14171, National Bureau of Economic Research, Inc.
  19. John F. Geweke, 1998. "Using simulation methods for Bayesian econometric models: inference, development, and communication," Staff Report 249, Federal Reserve Bank of Minneapolis.
  20. Peter N. Ireland, 2000. "Sticky-Price Models of the Business Cycle: Specification and Stability," NBER Working Papers 7511, National Bureau of Economic Research, Inc.
  21. Christopher A. Sims & Tao Zha, 2006. "Were There Regime Switches in U.S. Monetary Policy?," American Economic Review, American Economic Association, vol. 96(1), pages 54-81, March.
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