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Optimal monetary policy regime switches
Given regime switches in the economy?s growth rate, optimal monetary policy rules may respond by switching policy parameters. These optimized parameters differ across regimes and from the optimal choice under fixed regimes, particularly in the inflation target and interest rate inertia. Optimal switching rules produce welfare gains relative to constant rules, with switches in the implicit real interest rate used for policy and the degree of interest rate inertia producing the largest gains. However, gains from switching rules decrease if the monetary authority trades-off the probability of ...
Optimal Monetary Policy Regime Switches
An economy that switches between high and low growth regimes creates incentives for the monetary authority to change its rule. As lower growth tends to produce lower real interest rates, the monetary authority has an incentive to increase the inflation target and increase the degree of inertia in setting rates in an attempt to keep the nominal rate positive. An optimizing monetary authority therefore responds to permanently lower growth by slightly increasing both the inflation target and inertia; focusing solely on the inflation target ignores a key margin of adjustment. With repeated growth ...
The Changing Input-Output Network Structure of the U.S. Economy
U.S. industries have become less connected over the last 10 years, and service industries have become more central.
Consumption Growth Regimes and the Post-Financial Crisis Recovery
Andrew Foerster and Jason Choi find that consumption has grown more slowly after the Great Recession due to the continued influence of persistent factors unusual to see outside recessions.
Measuring the Stance of Monetary Policy on and off the Zero Lower Bound
Taeyoung Doh and Jason Choi propose a new ?shadow? short-term interest rate to measure the stance of policy when the federal funds rate was constrained by the zero lower bound.