Published in:Banque de France Working Paper ; No. 190
Extent:
1 Online-Ressource (58 p)
Language:
English
DOI:
10.2139/ssrn.1681469
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 1, 2007 erstellt
Description:
This paper investigates the effects of disinflation policies on key macroeconomic variables. Using postwar US data and episode techniques, we identify disinflation shocks as shocks that drive the inflation rate to a lower level in the long-run. We find that in the immediate aftermath of a disinflation policy, the economy enters in a persistent recession. The inflation rate increases above its long-run level and exhibits a positive hump-shaped response. A similar pattern is found for the nominal interest rate, which responds even more strongly in the short-run. We then show that the standard new Keynesian model fails to account for macroeconomic dynamics in disinflationary times. On the contrary a deep habit version of the model successfully accounts for the effects of disinflation policies