Monetary Policy Regime Shifts and Inflation Persistence

  title={Monetary Policy Regime Shifts and Inflation Persistence},
  author={Troy Davig and Taeyoung Doh},
  • Troy Davig, Taeyoung Doh
  • Published 2008
Using Bayesian methods, we estimate a Markov-switching New Keynesian (MSNK) model that allows shifts in the monetary policy reaction coefficients and shock volatilities. Using U.S. data, we find that a more-aggressive monetary policy regime was in place after the Volcker disinflation and before 1970 than during the Great Inflation of the 1970s. Our estimates also indicate that a low-volatility regime has been in place during most of the sample period after 1984. We connect the timing of the… CONTINUE READING
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