State-dependent Monetary Policy Regimes
Additional contact information
Shayan Zakipour-Saber: Central Bank of Ireland
No 4/RT/19, Research Technical Papers from Central Bank of Ireland
Are monetary policy regimes state-dependent? To answer the question this paper estimates New Keynesian general equilibrium models that allow the state of the economy to influence the monetary authority’s stance on inflation. I take advantage of recent developments in solving rational expectations models with state-dependent parameter drift to estimate three models on U.S. data between 1965-2009. In these models, the probability of remaining in a monetary policy regime that is relatively accommodative towards inflation, varies over time and depends on endogenous model variables; in particular, either deviations of inflation or output from their respective targets or a monetary policy shock. The main contribution of this paper is that it finds evidence of state-dependent monetary policy regimes. The model that allows inflation to influence the monetary policy regime in place, fits the data better than an alternative model with regime changes that are not state-dependent. This finding points towards reconsidering how changes in monetary policy are modeled.
Keywords: Markov-Switching DSGE; State-dependence; Bayesian Estimation (search for similar items in EconPapers)
JEL-codes: C13 C32 E42 E43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://centralbank.ie/docs/default-source/publica ... -saber).pdf?sfvrsn=8 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cbi:wpaper:4/rt/19
Access Statistics for this paper
More papers in Research Technical Papers from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().