The Federal Reserve s implicit inflation target and Macroeconomic dynamics. A SVAR analysis

Haroon Mumtaz and Konstantinos Theodoridis

No E2018/1, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper identifies shocks to the Federal Reserve's inflation target as VAR innovations that make the largest contribution to future movements in long-horizon inflation expectations. The effectiveness of this scheme is documented via Monte-Carlo experiments. The estimated impulse responses indicate that a positive shock to the target is associated with a large increase in inflation and long-term interest rates in the US and the industrialised world. Target shocks are estimated to be a vital factor behind the increase in inflation during the pre-1980 period and are an important driver of the decline in long-term interest rates over the last two decades.

Keywords: SVAR; DSGE model; inflation target; international (search for similar items in EconPapers)
JEL-codes: C5 E1 E5 E6 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2018-01
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://carbsecon.com/wp/E2018_1.pdf (application/pdf)

Related works:
Journal Article: THE FEDERAL RESERVE'S IMPLICIT INFLATION TARGET AND MACROECONOMIC DYNAMICS: AN SVAR ANALYSIS (2023)
Working Paper: The Federal Reserve’s implicit inflation target and Macroeconomic dynamics. A SVAR analysis (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2018/1

Access Statistics for this paper

More papers in Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section Contact information at EDIRC.
Bibliographic data for series maintained by Yongdeng Xu ().