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- Title
Monetary Policy Regimes and Beliefs.
- Authors
Andolfatto, D.; Gomme, P.
- Abstract
This article investigates the role of beliefs over monetary policy in propagating the effects of monetary policy shocks within the context of a dynamic, stochastic general equilibrium model. In our model, monetary policy periodically switches between low and high money growth regimes. When individuals are unable to observe the regime directly, they form inferences over regime–type based on historical money growth rates. For an empirically plausible money growth process, beliefs evolve slowly in the wake of a regime change. As a result, our model is able to capture some of the observed persistence of real and nominal variables following such a regime change.
- Subjects
MONETARY policy; ECONOMIC equilibrium
- Publication
International Economic Review, 2003, Vol 44, Issue 1, p1
- ISSN
0020-6598
- Publication type
Article
- DOI
10.1111/1468-2354.t01-1-00061