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Willem Van Zandweghe, FRB Kansas City Print
Thursday, 21 June 2018, 16:30 - 18:00

Willem Van Zandweghe, FRB Kansas City

Monetary Policy and Macroeconomic Stability Revisited

Abstract : A large literature with canonical New Keynesian models has established that the Fed's policy change from a passive to an active response to inflation led to U.S. macro-economic stability after the Great Inflation of the 1970s. We revisit this view by estimating a staggered price model with trend inflation using a Bayesian method that allows for equilibrium indeterminacy and adopts a sequential Monte Carlo algorithm. The model empirically outperforms a canonical New Keynesian model and demonstrates an active response to inflation even in the Great Inflation era, during which the U.S. economy was likely in the indeterminacy region of the model's parameter space. A more active response to inflation alone does not suffice for explaining the shift to determinacy after the Great Inflation, unless it is accompanied by a decline in trend inflation or a change in policy responses to the output gap and output growth. 

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Please reply by email to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it if you wish to participate to this seminar or if you want to have an appointment with the speaker. In case you want to access the NBB Parking (rue Montagne aux Herbes potagères 41), please also provide us with your name and the license plate of your car. 

 

 

Location: NBB - Auditorium of the National Bank of Belgium (Room A1)
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