Macro/Trade Seminar: Origins of Monetary Policy Shifts: A New Approach to Regime Switching in DSGE Models – School of Economics Macro/Trade Seminar: Origins of Monetary Policy Shifts: A New Approach to Regime Switching in DSGE Models – School of Economics

Macro/Trade Seminar: Origins of Monetary Policy Shifts: A New Approach to Regime Switching in DSGE Models

The School of Economics invites you to a Macro/Trade Economics seminar presented by

Junior Maih

(Norges Bank)

Co-authors:

Yoosoon Chang (Indiana University)

Fei Tan (Saint Louis University)

Abstract

We examine monetary policy shifts by taking a new approach to regime switching in a small scale monetary DSGE model with threshold-type switching in the monetary policy rule. The policy response to inflation is allowed to switch endogenously between two regimes, hawkish and dovish, depending on whether a latent regime factor crosses a threshold level. Endogeneity stems from the historical impacts of structural shocks driving the economy on the regime factor. We quantify the endogenous feedback from each structural shock to the regime factor to understand the sources of the observed policy shifts. This new channel sheds new light on the interaction between policy changes and measured economic behavior. We develop a computationally efficient filtering algorithm for state-space models with time-varying transition probabilities that handles classical regression models as a special case. We apply this filter to estimate our DSGE model using the U.S. data and find strong evidence of endogeneity in the monetary policy shifts.

Download a copy of the paper: Origins of Monetary Policy Shifts_A New Approach to Regime Switching in DSGE Models

Date

Mar 05 2019
Expired!

Time

2:00 pm - 3:00 pm

Location

Room 650, Social Sciences Building (A02)
Category

Organizer

Dave Mc Manamon
Phone
93514587
Email
dave.mcmanamon@sydney.edu.au

Leave a Reply

Your email address will not be published.