Regime switching and monetary policy measurement

Michael Owyang and Garey Ramey

No 2001-002, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper applies regime-switching methods to the problem of measuring monetary policy. Policy preferences and structural factors are specified parametrically as independent Markov processes. Interaction between the structural and preference parameters in the policy rule serves to identify the two processes. The estimates uncover policy episodes that are initiated by switches to \"dove regimes,\" shown to Granger-cause both NBER recessions and the Romer dates. These episodes imply real effects of monetary policy that are smaller than those found in previous studies.

Keywords: Phillips curve; Monetary policy (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (6)

Published in Journal of Monetary Economics, November 2004, 51(8), pp. 1577-1598

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Journal Article: Regime switching and monetary policy measurement (2004)
Working Paper: Regime Switching and Monetary Policy Measurement (2001)
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