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Monetary Policy Regime Shifts and Inflation Persistence

Troy Davig () and Taeyoung Doh

The Review of Economics and Statistics, 2014, vol. 96, issue 5, 862-875

Abstract: Using Bayesian methods, we estimate a Markov-switching New Keynesian (MSNK) model that allows shifts in the monetary policy reaction coefficients and shock volatilities with U.S. data. We find that a more aggressive monetary policy regime was in place after the Volcker disinflation and before 1970 than during the Great Inflation of the 1970s. Our estimates also indicate that a low-volatility regime has been in place during most of the sample period after 1984. We connect the timing of the different regimes to a measure of inflation persistence.

Keywords: Keynesian economics; monetary policy; Great Inflation; monetary policy regime (search for similar items in EconPapers)
JEL-codes: E42 E52 E65 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Monetary Policy Regime Shifts and Inflation Persistence (2009)
Working Paper: Monetary policy regime shifts and inflation persistence (2008) Downloads
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The Review of Economics and Statistics is currently edited by Amitabh Chandra, Olivier Coibion, Bryan S. Graham, Shachar Kariv, Amit K. Khandelwal, Asim Ijaz Khwaja, Brigitte C. Madrian and Rohini Pande

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