Abstract
The U.S. economy has experienced a reduction in volatility since the mid-1980s. In this paper we investigate the changes in the response of the economy to an oil price shock and the role of the systematic monetary policy response in accounting for changes in the response of output, prices, inventories, sales, and the overall decline in volatility. Our results suggest a smaller and more short-lived response of most macro variables during the Volcker-Greenspan period. It also appears that whereas the systematic monetary policy response dampened fluctuations in economic activity during the 1970s, it has had virtually no effect after the "Great Moderation".
| Original language | English |
|---|---|
| Pages (from-to) | 107-137 |
| Number of pages | 31 |
| Journal | Macroeconomic Dynamics |
| Volume | 13 |
| Issue number | 1 |
| DOIs | |
| State | Published - Feb 2009 |
Bibliographical note
Funding Information:Part of this research was done while Ana María Herrera was visiting Harvard’s Kennedy School of Government under a Repsol-YPF research fellowship, and Elena Pesavento was a Jean Monnet Fellow at the European University Institute. We thank the referee, the associate editor, and participants at the Emory Macro lunch workshop, Bocconi University, and the Federal Reserve Bank of Dallas for useful comments. Address correspondence to: Ana María Herrera, Department of Economics, Michagan State University, 110 Marshall-Adams Hall, East Lansing, MI 48895; e-mail: [email protected].
Funding
Part of this research was done while Ana María Herrera was visiting Harvard’s Kennedy School of Government under a Repsol-YPF research fellowship, and Elena Pesavento was a Jean Monnet Fellow at the European University Institute. We thank the referee, the associate editor, and participants at the Emory Macro lunch workshop, Bocconi University, and the Federal Reserve Bank of Dallas for useful comments. Address correspondence to: Ana María Herrera, Department of Economics, Michagan State University, 110 Marshall-Adams Hall, East Lansing, MI 48895; e-mail: [email protected].
| Funders | Funder number |
|---|---|
| European University Institute |
Keywords
- GDP Variance
- Oil Price Shocks
- Structural Break
- Systematic Monetary Policy
- VAR
ASJC Scopus subject areas
- Economics and Econometrics