Monetary Magic? How the Fed Improved the Flexibility of the U.S. Economy

WPIEA0242004 Image
Price:  $15.00

Author/Editor: Silvia Sgherri, Tamim Bayoumi
Release Date: © February, 2004
ISBN : 978-1-45184-417-7
Stock #: WPIEA0242004
Stock Status: On back-order

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Extending recent theoretical contributions on sources of inflation inertia, we argue that monetary uncertainty accounts for sluggish expectations adjustment to nominal disturbances. Estimating a model in which rational individuals learn over time about shifts in U.S. monetary policy and the Phillips curve, we find strong evidence that this link exists. These results bring into question the standard approach for evaluating monetary rules by assuming unchanged private sector responses, help clarify the role of monetary stability in reducing output variability in the United States and elsewhere, and tell a subtle and dynamic story of the interaction between monetary policy and the supply side of the economy.


Economic policy , Inflation , Monetary policy

More publications in this series: Working Papers

More publications by: Silvia Sgherri ; Tamim Bayoumi