Working Paper
What explains the varying monetary response to technology shocks in G-7 countries?
Abstract: In a recent paper, Gal, Lpez-Salido, and Valls (2003) examined the Federal Reserve?s response to VAR-identified technology shocks. They found that during the Martin-Burns- Miller era, the Fed responded to technology shocks by overstabilizing output, while in the Volcker-Greenspan era, the Fed adopted an inflation-targeting rule. We extend their analysis to countries of the G-7; moreover, we consider the factors that may contribute to differing monetary responses across countries. Specifically, we find a relationship between the volatility of capital investment, type of monetary policy rule, the responsiveness of the rule to output and inflation fluctuations, and the response to technology shocks.
https://doi.org/10.20955/wp.2004.002
Status: Published in International Journal of Central Banking, December 2005, 1(3), pp. 33-71
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Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2005
Number: 2004-002