Monetary policy across inflation regimes

Arbeitspapier

Does the effect of monetary policy depend on the prevailing level of inflation? In order to answer this question, we construct a parsimonious nonlinear time series model that allows for inflation regimes. We find that the effects of monetary policy are markedly different when year-over-year inflation exceeds 5.5 percent. Below this threshold, changes in monetary policy have a short-lived effect on prices, but no effect on the unemployment rate, giving a potential explanation for the recent "soft landing" in the United States. Above this threshold, the effects of monetary policy surprises on both inflation and unemployment can be larger and longer lasting.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 1083

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Hypothesis Testing: General ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• Subject: monetary policy shocks ; inflation ; regime-dependence ; outliers ; nonlinear time series models

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gargiulo, Valeria ; Matthes, Christian ; Petrova, Katerina
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2024

Further information

• DOI: doi:10.59576/sr.1083
• Handle: http://hdl.handle.net/10419/284043
• Last update: 10.03.2025, 11:46 AM CET