Policy Regimes, Policy Shifts, and US Business Cycles

• 成果类型: Article
• 署名作者: Bhattarai, Saroj; Lee, Jae Won; Park, Woong Yong
• 署名单位: University of Texas System; University of Texas Austin; University of Virginia; Seoul National University (SNU)
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/REST_a_00556
• 发表日期: 2016-12
• 页码: 968-983
• 关键词: rational-expectations models; monetary-policy; fiscal theory; price-level; macroeconomic stability; taylor principle; public debt; inflation; indeterminacy; persistence

摘要

Using an estimated DSGE model with monetary and fiscal policy interactions and allowing for equilibrium indeterminacy, we find that a passive monetary and passive fiscal policy regime prevailed in the pre-Volcker period. This gave rise to self-fulfilling beliefs and unconventional transmission mechanisms of policy shifts: unanticipated increases in interest rates increased inflation and output, while unanticipated increases in lump-sum taxes decreased inflation and output. We show that had the monetary policy regime of the post-Volcker era been in place pre-Volcker, inflation volatility would have been lower by 25% and the rise of inflation in the 1970s would not have occurred.