Does the Transmission of Monetary Policy Shocks Change when Inflation is High?

Fabio Canova and Pérez Forero, Fernando J.
Authors registered in the RePEc Author Service: Fernando José Pérez Forero ()

No 21339, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate the transmission of US monetary policy shocks in high and low inflation regimes using a Bayesian threshold vector autoregressive model. The propagation of conventional disturbances differs: the peak response of output growth and inflation is smaller, but the effects lasts longer when inflation is high. Liquidity shocks are more expansionary when inflation is high. The reaction of financial markets to the shocks accounts for the differences. Implications for theoretical models are discussed.

Keywords: Monetary; policy; shocks (search for similar items in EconPapers)
JEL-codes: C3 E3 E5 (search for similar items in EconPapers)
Date: 2026-03
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Related works:
Working Paper: Does the Transmission of Monetary Policy Shocks Change when Inflation is High? (2024)
Working Paper: Does the transmission of monetary policycshocks change when inflation is high? (2024)
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