Drift and Volatilities: Monetary Policies and Outcomes in the Post WWII U.S

Timothy Cogley () and Thomas Sargent

Review of Economic Dynamics, 2005, vol. 8, issue 2, 262-302

Abstract: For a VAR with drifting coefficients and stochastic volatilities, we present posterior densities for several objects that are pertinent for designing and evaluating monetary policy. These include easures of inflation persistence, the natural rate of unemployment, a core rate of inflation, and activism coefficients for monetary policy rules. Our posteriors imply substantial variation of all of these objects for post WWII U.S. data. After adjusting for changes in volatility, persistence of inflation increases during the 1970s, then falls in the 1980s and 1990s. Innovation variances change systematically, being substantially larger in the late 1970s than during other times. Measures of uncertainty about core inflation and the degree of persistence covary positively. We use our posterior distributions to evaluate the power of several tests that have been used to test the null hypothesis of time-invariance of autoregressive coefficients of VARs against the alternative of time-varying coefficients. Except for one, we find that those tests have low power against the form of time variation captured by our model. (Copyright: Elsevier)

Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (990)

Downloads: (external link)
http://dx.doi.org/10.1016/j.red.2004.10.009 Full text (application/pdf)
Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.

Related works:
Working Paper: Drifts and volatilities: monetary policies and outcomes in the post WWII U.S (2003)
Working Paper: Drifts and Volatilities: Monetary Policies and Outcomes in the Post WWII US
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:red:issued:v:8:y:2005:i:2:p:262-302

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2004.10.009

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().