The Great Moderation of Inflation: a structural analysis of recent U.S. monetary business cycles

Miguel Casares and Jesús Vázquez

Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: U.S. inflation has experienced a great moderation in the last two decades. This paper examines the factors behind this and other stylized facts, such as the weaker correlation ofinflation and nominal interest rate (Gibson paradox). Our findings point at lower exogenous variability of supply-side shocks and, to a lower extent, structural changes in money demand, monetary policy, and firms’ sticky pricing behavior as the main driving forces of the changes observed in recent U.S. business cycles.

Keywords: DSGE monetary model; inflation moderation; structural changes. (search for similar items in EconPapers)
JEL-codes: E32 E47 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-dge and nep-mac
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