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Stop‐go monetary policy
journal contribution
posted on 2019-04-25, 12:39 authored by Henry W. Chappell, Mark N. Harris, Rob Roy McGregor, Christopher SpencerChristopher SpencerWe propose and estimate several discrete choice models of monetary policy decision-making
that feature time-varying inertia. The models permit us to account for three stylized facts
characterizing monetary policymaking in the United States: (1) target interest rates are gradually
adjusted in small discrete movements, (2) there are some long stretches of time in which rates are
repeatedly moved, and (3) there are other long stretches in which the policy rate does not change.
Our models are used to account for the Fed’s failure to adopt promptly an easier policy stance
during the recession of 2001. They are also used to explain delay in tightening the policy stance
during the 2003-2006 period that featured a bubble in house prices and was followed by a
financial crisis in 2008.
Funding
Spencer thanks the School of Business and Economics for financially supporting this research. Harris kindly acknowledges financial support from the Australia Research Council.
History
School
- Business and Economics
Department
- Economics
Published in
Economic InquiryVolume
57Issue
3Pages
1698-1717Citation
CHAPPELL, H.W. .... et al., 2019. Stop‐go monetary policy. Economic Inquiry, 57 (3), pp.1698-1717.Publisher
© Western Economic Association International. Published by WileyVersion
- AM (Accepted Manuscript)
Publisher statement
This is the peer reviewed version of the following article: CHAPPELL, H.W. .... et al., 2019. Stop‐go monetary policy. Economic Inquiry, 57 (3), pp.1698-1717, which has been published in final form at https://doi.org/10.1111/ecin.12787. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived VersionsAcceptance date
2019-03-07Publication date
2019-04-10Copyright date
2019ISSN
0095-2583eISSN
1465-7295Publisher version
Language
- en