What Explains the Varying Monetary Response to Technology Shocks in G-7 Countries?

Neville R Francis, Michael Owyang and Athena T Theodorou

MPRA Paper from University Library of Munich, Germany

Abstract: In a recent paper, Galí, López-Salido, and Vallées (2003) examined the Federal Reserve’s response to VAR-identified technology shocks. They found that during the Martin-Burns- Miller era, the Federal Reserve responded to technology shocks by overstabilizing output, while in the Volcker-Greenspan era, the Federal Reserve adopted an inflation-targeting rule. We extend their analysis to countries of the G-7; moreover, we consider the factors that may contribute to differing monetary responses across countries. Specifically, we find a relationship between the volatility of capital investment, the type of monetary policy rule, the responsiveness of the rule to output and inflation fluctuations, and the response to technology shocks.

Keywords: price setting; nominal rigidity; real rigidity; inflation persistence; survey data (search for similar items in EconPapers)
JEL-codes: G0 G00 (search for similar items in EconPapers)
Date: 2005-06-14
New Economics Papers: this item is included in nep-cba and nep-mac
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Citations: View citations in EconPapers (16)

Published in International Journal of Central Banking Number 3.Volume(2005): pp. 33-71

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Related works:
Journal Article: What Explains the Varying Monetary Response to Technology Shocks in G-7 Countries? (2005)
Working Paper: What explains the varying monetary response to technology shocks in G-7 countries? (2005)
Working Paper: What Explains the Varying Monetary Response to Technology SHocks in G7-Countries (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:834

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