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The dynamics of US inflation: Can monetary policy explain the changes?

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  • Canova, Fabio
  • Ferroni, Filippo

Abstract

We investigate the relationship between monetary policy and inflation dynamics in the US using a medium scale structural model. The specification is estimated with Bayesian techniques and fits the data reasonably well. Policy shocks account for a part of the decline in inflation volatility; they have been less effective in triggering inflation responses over time and qualitatively account for the rise and fall in the level of inflation. A number of structural parameter variations contribute to these patterns.

Suggested Citation

  • Canova, Fabio & Ferroni, Filippo, 2012. "The dynamics of US inflation: Can monetary policy explain the changes?," Journal of Econometrics, Elsevier, vol. 167(1), pages 47-60.
    • Handle: RePEc:eee:econom:v:167:y:2012:i:1:p:47-60
    DOI: 10.1016/j.jeconom.2011.08.008
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    More about this item

    Keywords

    New Keynesian model; Bayesian methods; Monetary policy; Inflation dynamics;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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