Drifts and Volatilities: Monetary Policies and Outcomes in the Post WWII US

Timothy Cogley () and Thomas Sargent

Working Papers from Department of Economics, W. P. Carey School of Business, Arizona State University

Abstract: For a VAR with drifting coefficients and stochastic volatilities, we present posterior densities for several objects that are of interest for designing and evaluating monetary policy. These include measures 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 of time-invariance of autoregressive coefficients of VARs against the alternative of timevarying coefficients. Except for one test, we find that those tests have low power against the form of time variation captured by our model. That one test also rejects time invariance in the data.

New Economics Papers: this item is included in nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
http://wpcarey.asu.edu/tools/mytools/pubs_admin/FI ... /research/sims14.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/ftp://zia.stanford.edu/pub/sargent/webdocs/research/sims14.pdf [301 Moved Permanently]--> https://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/ftp://zia.stanford.edu/pub/sargent/webdocs/research/sims14.pdf [302 Found]--> https://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/ftp:/zia.stanford.edu/pub/sargent/webdocs/research/sims14.pdf)

Related works:
Journal Article: Drift and Volatilities: Monetary Policies and Outcomes in the Post WWII U.S (2005)
Working Paper: Drifts and volatilities: monetary policies and outcomes in the post WWII U.S (2003)
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:asu:wpaper:2133503

Access Statistics for this paper

More papers in Working Papers from Department of Economics, W. P. Carey School of Business, Arizona State University Contact information at EDIRC.
Bibliographic data for series maintained by Steve Salik ( this e-mail address is bad, please contact ).