Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70734
Authors: 
Liu, Zheng
Waggoner, Daniel F.
Zha, Tao
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2007-23
Abstract: 
The possibility of regime shifts in monetary policy can have important effects on rational agents' expectation formation and equilibrium dynamics. In a dynamic stochastic general equilibrium model where the monetary policy rule switches between a dovish regime that accommodates inflation and a hawkish regime that stabilizes inflation, the expectation effect is asymmetric across regimes. Such an asymmetric effect makes it difficult but still possible to generate substantial reductions in the volatilities of inflation and output as the monetary policy switches from the dovish regime to the hawkish one.
Subjects: 
structural breaks
expectations formation
monetary policy regime
macroeconomic volatility
Lucas critique
JEL: 
E32
E42
E52
Document Type: 
Working Paper

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