Template-Type: ReDIF-Paper 1.0
Author-Name: Haroon Mumtaz
Author-Name-First: Haroon
Author-Name-Last: Mumtaz
Author-Name: Konstantinos Theodoridis
Author-Name-First: Konstantinos
Author-Name-Last: Theodoridis
Title: The Federal Reserve’s implicit inflation target and Macroeconomic dynamics. A SVAR analysis.
Abstract: This paper identifies shocks to the Federal Reserve's inflation target as VAR innovations that make the largest contribution to future movements in long-horizon inflation expectations. The effectiveness of this scheme is documented via Monte-Carlo experiments. The estimated impulse responses indicate that a positive shock to the target is associated with a large increase<br/>in inflation, GDP growth and long-term interest rates. Target shocks are estimated to be a vital factor behind the increase in inflation during the pre-1980 period and are an important driver of the decline in long-term interest rates over the last two decades.
Creation-Date: 2017
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2017_015.pdf
File-Format: application/pdf
Number: 173173908
Classification-JEL: C5, E1, E5, E6
Keywords: SVAR, DSGE model, inflation target
Handle: RePEc:lan:wpaper:173173908