Endogenous Monetary Policy Regime Change

Troy Davig and Eric Leeper

No 12405, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation effects generated by the possibility of regime change can be quantitatively important; (ii) symmetric shocks can have asymmetric effects; (iii) endogenous switching is a natural way to formally model preemptive policy actions. In a conventional calibrated model, preemptive policy shifts agents' expectations, enhancing the ability of policy to offset demand shocks; this yields a quantitatively significant "preemption dividend."

JEL-codes: E31 E32 E52 E58 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Published as Endogenous Monetary Policy Regime Change , Troy Davig, Eric M. Leeper. in NBER International Seminar on Macroeconomics 2006 , Reichlin and West. 2008

Downloads: (external link)
http://www.nber.org/papers/w12405.pdf (application/pdf)

Related works:
Chapter: Endogenous Monetary Policy Regime Change (2008)
Working Paper: Endogenous monetary policy regime change (2006)
Working Paper: Endogenous Monetary Policy Regime Change (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:12405

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w12405

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().