EconPapers    
Economics at your fingertips  
 

Origins of monetary policy shifts: A New approach to regime switching in DSGE models

Yoosoon Chang, Junior Maih () and Fei Tan

Journal of Economic Dynamics and Control, 2021, vol. 133, issue C

Abstract: We examine monetary policy shifts by taking a new approach to regime switching in a small scale DSGE model with threshold-type switching in the monetary policy rule. The policy response to inflation is allowed to switch endogenously between two regimes, hawkish and dovish, depending on whether a latent regime factor crosses a threshold level. Endogeneity stems from the historical impacts of structural shocks driving the economy on the regime factor. By estimating our DSGE model using the U.S. data, we quantify the endogenous feedback from each structural shock to the regime factor to understand the sources of the observed policy shifts. This new channel sheds new light on the interaction between policy changes and measured economic behavior.

Keywords: Monetary policy; DSGE Model; Regime switching; Latent autoregressive regime factor; Endogenous feedback; Expectations formation effects (search for similar items in EconPapers)
JEL-codes: C13 C32 E52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188921001706
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Origins of Monetary Policy Shifts: A New Approach to Regime Switching in DSGE Models (2018) Downloads
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:eee:dyncon:v:133:y:2021:i:c:s0165188921001706

DOI: 10.1016/j.jedc.2021.104235

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-08-18
Handle: RePEc:eee:dyncon:v:133:y:2021:i:c:s0165188921001706