Does US monetary policy respond to oil and food prices?

Engin Kara

Journal of International Money and Finance, 2017, vol. 72, issue C, 118-126

Abstract: A common view is that US monetary policy does not respond to changes in volatile energy and food prices. Despite this view, the popular New Keynesian models assume Taylor-type rules under which the short-term interest rates react to headline inflation. This paper evaluates the fit of alternative Taylor rules within an estimated New Keynesian model. A main finding is that the US central bank includes energy and food prices in its policy rule, although the weight assigned to these prices is much smaller than their share in the economy.

Keywords: DSGE models; Multiple Calvo; Taylor rules; Sector-specific shocks; Core inflation (search for similar items in EconPapers)
JEL-codes: E10 E30 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:72:y:2017:i:c:p:118-126

DOI: 10.1016/j.jimonfin.2016.12.004

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