Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153258 
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper No. 824
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Using a structural VAR with time-varying parameters and stochastic volatility on post-WWII U.S. data, we document a striking negative correlation between the evolution of the long-run coefficient on inflation in the monetary rule and the evolution of the persistence and predictability of inflation relative to a trend component. Using a standard sticky-price model, we show that a more aggressive policy stance towards inflation causes a decline in inflation predictability, providing a possible interpretation for the findings of the structural VAR.
Subjects: 
Bayesian time-varying VARs
frequency domain
Great Inflation
predictability
sign restrictions
JEL: 
E37
E52
E58
Document Type: 
Working Paper

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