Monetary policy regimes and beliefs

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Monetary policy regimes and beliefs

Author Info

David Andolfatto
Paul Gomme

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Abstract

Revised. This paper investigates the role of beliefs over monetary policy in propagating the effects of monetary policy shocks within the context of a dynamic, stochastic general equilibrium model. In this model, monetary policy periodically switches between low- and high-money-growth regimes. When individuals cannot observe the regime directly, they must draw inferences over regime type based on historical money growth rates. The authors show that for an empirically plausible money growth process, beliefs evolve slowly in the wake of a regime change. As a result, their model is able to capture some of the observed persistence of real and nominal variables following such a regime change.

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Publisher Info
Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9905.

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Length: 1-34
Date of creation: 2001
Date of revision:
Handle: RePEc:fip:fedcwp:9905

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Related research
Keywords: Monetary policy;

Other versions of this item:

Article
- David Andolfatto & Paul Gomme, 2003. "Monetary Policy Regimes and Beliefs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 1-30, February. [Downloadable!] (restricted)
Paper
- David Andolfatto & Paul Gomme, 1997. "Monetary policy regimes and beliefs," Discussion Paper / Institute for Empirical Macroeconomics 118, Federal Reserve Bank of Minneapolis. [Downloadable!]
- David Andolfatto & Paul Gomme, 1997. "Monetary Policy Regimes and Beliefs," Working Papers 97002, University of Waterloo, Department of Economics, revised Jan 1997.
- David Andolfatto & Paul Gomme, 1997. "Monetary Policy Regimes and Beliefs," Cahiers de recherche CREFE / CREFE Working Papers 48, CREFE, Université du Québec à Montréal, revised Apr 2001. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-1999-09-09 (All new papers)
NEP-DGE-1999-09-09 (Dynamic General Equilibrium)
NEP-MON-1999-09-09 (Monetary Economics)

This item is featured on the following reading lists:

Canadian Macro Study Group

References listed on IDEAS
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Other versions:
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Other versions:
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