Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284043 
Year of Publication: 
2024
Series/Report no.: 
Staff Report No. 1083
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Does the effect of monetary policy depend on the prevailing level of inflation? In order to answer this question, we construct a parsimonious nonlinear time series model that allows for inflation regimes. We find that the effects of monetary policy are markedly different when year-over-year inflation exceeds 5.5 percent. Below this threshold, changes in monetary policy have a short-lived effect on prices, but no effect on the unemployment rate, giving a potential explanation for the recent "soft landing" in the United States. Above this threshold, the effects of monetary policy surprises on both inflation and unemployment can be larger and longer lasting.
Subjects: 
monetary policy shocks
inflation
regime-dependence
outliers
nonlinear time series models
JEL: 
C11
C12
C22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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