Paper #1241

Title:

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

Authors:

Fabio Canova and Filippo Ferroni

Date:

June 2010

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.

Keywords:

New Keynesian model, Bayesian methods, Monetary policy, Inflation dynamics.

JEL codes:

E52, E47, C53.

Area of Research:

Macroeconomics and International Economics

Published in:

Journal of Econometrics, 167 (1), 47-60, 2011

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