Arbeitspapier

Macroeconomic dynamics and inflation regimes in the US: Results from threshold vector autoregressions

This paper studies regime dependence in macroeconomic dynamics in the U.S. using a threshold vector autoregressive model in which endogenous regime switches are triggered by the inflation rate. The model separates a high from a low inflation regime with both regimes being strongly persistent. Generalized impulse response functions highlight important across-regime differences in the responses of the economy to monetary policy and inflation shocks. Simulating both regimes with individual structural equations interchanged shows a change in inflation dynamics to be the most important source of the transition of the U.S. economy from the high into the low inflation state while the change in the monetary policy reaction functions has only very little effect. Our results indicate that favorable changes in the economic structure and less frequent and smaller shocks are important explanations for the observed decline in U.S. macroeconomic volatility since the mid 1980s.

Language: Englisch

Bibliographic citation: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 12-2010

Classification: Wirtschaft
Business Fluctuations; Cycles
Central Banks and Their Policies
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

Subject: threshold vector autoregression
Great Moderation
Konjunktur
Inflation
Makroökonomischer Einfluss
Geldpolitik
Schock
VAR-Modell
Schätzung
USA

Event: Geistige Schöpfung

(who): Mandler, Martin

Event: Veröffentlichung

(who): Philipps-University Marburg, Faculty of Business Administration and Economics

(where): Marburg

(when): 2010

Handle: http://hdl.handle.net/10419/56530

Last update: 10.03.2025, 11:43 AM CET

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Object type

Arbeitspapier

Associated

Mandler, Martin
Philipps-University Marburg, Faculty of Business Administration and Economics

Time of origin

2010

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