Research output: Working paper
Research output: Working paper
}
TY - UNPB
T1 - The Federal Reserve’s implicit inflation target and Macroeconomic dynamics. A SVAR analysis.
AU - Mumtaz, Haroon
AU - Theodoridis, Konstantinos
PY - 2017/5
Y1 - 2017/5
N2 - This paper identifies shocks to the Federal Reserve's inflation target as VAR innovations that make the largest contribution to future movements in long-horizon inflation expectations. The effectiveness of this scheme is documented via Monte-Carlo experiments. The estimated impulse responses indicate that a positive shock to the target is associated with a large increasein inflation, GDP growth and long-term interest rates. Target shocks are estimated to be a vital factor behind the increase in inflation during the pre-1980 period and are an important driver of the decline in long-term interest rates over the last two decades.
AB - This paper identifies shocks to the Federal Reserve's inflation target as VAR innovations that make the largest contribution to future movements in long-horizon inflation expectations. The effectiveness of this scheme is documented via Monte-Carlo experiments. The estimated impulse responses indicate that a positive shock to the target is associated with a large increasein inflation, GDP growth and long-term interest rates. Target shocks are estimated to be a vital factor behind the increase in inflation during the pre-1980 period and are an important driver of the decline in long-term interest rates over the last two decades.
KW - SVAR
KW - DSGE model
KW - inflation target
M3 - Working paper
T3 - Economics Working Paper Series
BT - The Federal Reserve’s implicit inflation target and Macroeconomic dynamics. A SVAR analysis.
PB - Lancaster University, Department of Economics
CY - Lancaster
ER -