Inflation persistence and monetary policy: DSGE‐VAR approach

Kuo‐Hsuan Chin

Manchester School, 2022, vol. 90, issue 6, 715-729

Abstract: We study the dynamics of U.S. inflation persistence and the sources resulting to it over the “Great Inflation” and “Great Moderation” periods. It is different from most of the current studies in that we consider a Bayesian VAR model with the DSGE prior, the so‐called DSGE‐VAR approach, in which the prior economic information is coming from a small‐scale New Keynesian DSGE model. In the recursive estimation of the model, we find a decline in the inflation persistence, measured by the “half‐life” response of inflation to the monetary policy shock, in the early 1980s. The stance of monetary policy, particularly the aggressive attitude toward the monetary policy implementation, plays an important role in explaining the structural change of the inflation persistence.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/manc.12420

Related works:
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:bla:manchs:v:90:y:2022:i:6:p:715-729

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1463-6786

Access Statistics for this article

Manchester School is currently edited by Keith Blackburn

More articles in Manchester School from University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().