Does the transmission of monetary policy shocks change when inflation is high?
Por Canova Fabio; Fernando Pérez
May 2024
Idioma: English
Keywords
- bayesian methods
- inflation regimes
- menu costs models
- monetary policy shocks
- rational inattention models
- Threshold VAR
Clasificación JEL:
- C3
- E3
- E5
Resumen:
We investigate the transmission of US monetary policy shocks in high and low inflation regimes using a Bayesian threshold vector autoregressive model. The propagation of conventional disturbances differs: the peak response of output growth and of inflation is smaller but the effects lasts longer when inflation is high. Liquidity shocks are more expansionary when inflation is high. The reaction of financial markets to the shocks account for the differences. Implications for theoretical models of monetary policy transmission are discussed.