Policy Rules, Regime Switches, and Trend Inflation: An Empirical Investigation for the U.S

Efrem Castelnuovo, Luciano Greco and Davide Raggi

No 109, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: This paper estimates Taylor rules featuring instabilities in policy parameters, switches in policy shocks' volatility, and time-varying trend inflation using post-WWII U.S. data. The model embedding the stochastic target performs better in terms of data-fit and identification of the changes in the FOMC's chairmanships. Policy breaks are found not to be synchronized with variations in policy shocks' volatilities. Finally, we detect a negative correlation between systematic monetary policy aggressiveness and inflation gap persistence.

JEL-codes: E52 E61 E62 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2010-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Policy Rules, Regime Switches, and Trend Inflation: An Empirical Investigation for the U.S (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0109

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