Monetary policy shocks have less influence on inflation during Great Moderation.
The article introduces a new type of dynamic model to study how economic factors interact over time. The researchers developed a method to estimate the model's parameters and tested it using U.S. monetary policy data. They found that the impact of monetary policy on inflation has changed over time, with inflation becoming more stable in recent years. Additionally, they discovered that inflation levels have been close to the Federal Reserve's target of two percent since a period known as the Great Moderation began.