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Luca Benati, Paolo Surico, Evolving U.S. Monetary Policy and the Decline of Inflation Predictability, Journal of the European Economic Association, Volume 6, Issue 2-3, 1 May 2008, Pages 634–646, https://doi.org/10.1162/JEEA.2008.6.2-3.634
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Abstract
Based on a structural VAR with time-varying parameters and stochastic volatility for the post-WWII U.S., we document a negative correlation between the evolution of the long-run coefficient on inflation in the structural monetary rule and the evolution of the persistence and predictability of inflation relative to a trend component. Using an estimated sticky-price model, we show that a more aggressive policy stance towards inflation causes a decline in inflation predictability.
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© 2008 by the European Economic Association
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