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Has the FED Fallen behind the Curve? Evidence from VAR models

Antonio Conti ()

Economics Letters, 2017, vol. 159, issue C, 164-168

Abstract: We evaluate the role of US monetary policy in shaping inflation and economic activity by means of a medium-scale Bayesian VAR model, where the ZLB and the unconventional measures are addressed by using a shadow interest rate. The historical decomposition and a conditional forecast scenario show that the FED’s stance is in line with GDP and inflation dynamics. Moreover, core inflation will likely lie below its target in 2017.

Keywords: Monetary policy; Inflation; Bayesian VAR; Sign restrictions; Conditional forecasting (search for similar items in EconPapers)
Date: 2017
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