The Federal Reserve’s implicit inflation target and Macroeconomic dynamics. A SVAR analysis
Haroon Mumtaz and
Konstantinos Theodoridis ()
No E2018/1, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section
This paper identifies shocks to the Federal Reserve's inflation target as VAR innovations that make the largest contribution to future movements in long-horizon inflation expectations. The effectiveness of this scheme is documented via Monte-Carlo experiments. The estimated impulse responses indicate that a positive shock to the target is associated with a large increase in inflation and long-term interest rates in the US and the industrialised world. Target shocks are estimated to be a vital factor behind the increase in inflation during the pre-1980 period and are an important driver of the decline in long-term interest rates over the last two decades.
Keywords: SVAR; DSGE model; inflation target; international (search for similar items in EconPapers)
JEL-codes: C5 E1 E5 E6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Working Paper: The Federal Reserve’s implicit inflation target and Macroeconomic dynamics. A SVAR analysis (2017)
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:cdf:wpaper:2018/1
Access Statistics for this paper
More papers in Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section Contact information at EDIRC.
Bibliographic data for series maintained by Yongdeng Xu ().