Evolving U.S. Monetary Policy and the Decline of Inflation Predictability
By Luca Benati, P. Surico. Social Science Research Network, 2008
150 citations recorded by the source corpus.
Using a structural VAR with time-varying parameters and stochastic volatility on post-WWII U.S. data, we document a striking negative correlation between the evolution of the long-run coefficient on inflation in the monetary rule and the evolution of the persistence and predictability of inflation relative to a trend component. Using a standard sticky-price model, we show that a more aggressive policy stance towards inflation causes a decline in inflation predictability, providing a possible interpretation for the findings of the structural VAR. JEL Classification: E37, E52, E58
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/d651fe35eec80853c5263c96e1e430127980caff
How researchers see this paper
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In Economics and Econometrics
- Liudas Giraitis
- Tony Yates
- George Kapetanios
- S. Kaufmann
- M. Pesaran
- K. Petrova
- Jushan Bai
- Brantley Liddle
Citations in the corpus
- Inference on stochastic time-varying coefficient models (2014, background): “These are Cogley and Sargent (2001), Cogley and Sargent (2005), Cogley, Sargent, and Primiceri (2010), Benati (2010), Benati and Surico (2008), Mumtaz and Surico (2009), Pesaran, Pettenuzzo, and Timmermann (2006), Stock and Watson (1998), Koop and Potter (2008) and Koop and Potter (2007).”
- Monetary Policy Regime Shifts and Inflation Persistence (2009, unknown): “Recent efforts to interpret changes in inflation persistence through the lens of dynamic stochastic general equilibrium (DSGE) models, such as Benati and Surico (2007), Carlstrom, Fuerst, and Paustian (2008) and Cogley, Primiceri, and Sargent (2009), focus on the role of monetary policy and the decl”
- K-state switching models with time-varying transition distributions—Does loan growth signal stronger effects of variables on inflation? (2015, background): “These are typically the periods in which the relationship between trend M3 growth and inflation might be masked and, moreover, render inflation less predictable (Benati and Surico 2008).”