We augment a standard monetary VAR on output growth, inflation and the nominal interest rate with the central bank's inflation target, which we estimate from a New Keynesian DSGE model. Inflation target shocks give rise to a simultaneous increase in inflation and the nominal interest rate in the short run, at no output expense, which stands at the center of an active current debate on the Neo-Fisher effect. In addition, accounting for persistent monetary policy changes reflected in inflation target changes improves identification of a standard temporary nominal interest rate shock in that it strongly alleviates the price puzzle. / Series: Department of Economics Working Paper Series
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:6681 |
| Date | 11 1900 |
| Creators | Lukmanova, Elizaveta, Rabitsch, Katrin |
| Publisher | WU Vienna University of Economics and Business |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Paper, NonPeerReviewed |
| Format | application/pdf |
| Relation | https://www.wu.ac.at/economics/forschung/wp/, http://epub.wu.ac.at/6681/ |
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