Explaining Inflation-Gap Persistence by a Time-Varying Taylor Rule

Christian Conrad and Thomas Eife (thomas.eife@gmail.com)

No 521, Working Papers from University of Heidelberg, Department of Economics

Abstract: In a simple New Keynesian model, we derive a closed form solution for the inflation-gap persistence parameter as a function of the policy weights in the central bank’s Taylor rule. By estimating the time-varying weights that the FED attaches to inflation and the output gap, we show that the empirically observed changes in U.S. inflation-gap persistence during the period 1975 to 2010 can be well explained by changes in the conduct of monetary policy. Our findings are in line with Benati’s (2008) view that inflation persistence should not be considered a structural parameter in the sense of Lucas.

Keywords: inflation-gap persistence; Great Moderation; monetary policy; New Keynesian model; Taylor rule (search for similar items in EconPapers)
JEL-codes: C22 E31 E52 E58 (search for similar items in EconPapers)
Date: 2012-02-17
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
https://nbn-resolving.de/urn:nbn:de:bsz:16-opus-131170 Frontdoor page on HeiDOK (text/html)
https://archiv.ub.uni-heidelberg.de/volltextserver ... _Eife_2012_dp521.pdf (application/pdf)

Related works:
Journal Article: Explaining inflation-gap persistence by a time-varying Taylor rule (2012)
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:awi:wpaper:0521

Access Statistics for this paper

More papers in Working Papers from University of Heidelberg, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Gabi Rauscher (sekretariat.wt2@awi.uni-heidelberg.de this e-mail address is bad, please contact repec@repec.org).