Monetary Policy, Trend Inflation, and the Great Moderation: An Alternative Interpretation

• Published in: The American economic review Vol. 101; no. 1; pp. 341 - 370
• Main Authors: Coibion, Olivier, Gorodnichenko, Yuriy
• Format: Journal Article
• Language: English
• Published: Nashville American Economic Association 01.02.2011; American Economic Assoc
• Subjects: 1969-2002; Central banks; Determinacy; Economic conditions; Economic inflation; Economic models; Economic theory; Economic trends; Equilibrium; Estimates; Federal Reserve Bank; Federal Reserve monetary policy; Geldpolitik; Hypotheses; Inflation; Inflation rates; Inflationsrate; Interest rates; Keynesian theory; Keynesianism; Macroeconomics; Monetary policy; Neokeynesianism; Output gaps; Shorter Papers; Studies; Taylor rule; Taylor-Regel; U.S.A; USA; Volatilität; Wirtschaftswachstum; United States > US

With positive trend inflation, the Taylor principle does not guarantee a determinate equilibrium. We provide new theoretical results on determinacy in New Keynesian models with positive trend inflation and new empirical findings on the Federal Reserve's reaction function before and after the Vo...