The origins of monetary policy disagreement: the role of supply and demand shocks

Carlos Madeira, Joao Madeira and Paulo Santos Monteiro

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: We investigate how dissent in the FOMC is affected by structural macroeconomic shocks obtained using a medium-scale DSGE model. We find that dissent is less (more) frequent when demand (supply) shocks are the predominant source of inflation fluctuations. In addition, supply shocks are found to raise private sector forecasting uncertainty about the path of interest rates. Since supply shocks impose a trade-off between inflation and output stabilization while demand shocks do not, our findings are consistent with heterogeneous preferences over the dual mandate among FOMC members as a driver of policy disagreement.

Date: 2023-10
New Economics Papers: this item is included in nep-dge and nep-mon
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Working Paper: The origins of monetary policy disagreement: the role of supply and demand shocks (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:993

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