Technology shocks and monetary policy : Revisiting the Fed's performance

Matheron, Julien; Avouyi-Dovi, Sanvi

Matheron, Julien; Avouyi-Dovi, Sanvi (2007), Technology shocks and monetary policy : Revisiting the Fed's performance, Journal of money, credit and banking, 39, 2-3, p. 471-507. http://dx.doi.org/10.1111/j.0022-2879.2007.00033.x

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Type

Article accepté pour publication ou publié

Date

2007

Journal name

Journal of money, credit and banking

Volume

Number

2-3

Publisher

Ohio State University Press

Pages

471-507

Abstract (EN)

Would the U.S. economy's dynamic response to permanent technology shocks have been different from the actual responses if monetary authorities' systematic response to these shocks had been optimal ? To answer this question, we characterize the dynamic effects of permanent technology shocks and the way in which U.S. monetary authorities reacted to these shocks over the sample 1955(1)-2002(4) using a structural VAR. A sticky price-sticky wage model is developed and estimated to reproduce these responses. We then formally compare these responses with the outcome of the optimal monetary policy.

Subjects / Keywords

Sticky prices and wages; Taylor rule; Optimal monetary policy

JEL

E31 - Price Level; Inflation; Deflation
E32 - Business Fluctuations; Cycles
E58 - Central Banks and Their Policies