Monetary policy shocks have less impact on inflation, study finds.
The article introduces a new type of dynamic model to analyze how different economic factors affect each other over time. By using this model, the researchers were able to study how changes in monetary policy impact inflation rates in the U.S. They found that monetary policy had less impact on inflation during a period called the Great Moderation, and that inflation has been more stable recently. Overall, the long-term inflation rate is close to the Federal Reserve's target of two percent.