Monetary policy shifts driven by historical impacts on regime factor.
The article explores how changes in monetary policy are influenced by different economic conditions. By using a new method that allows policy responses to switch between being tough or lenient based on certain factors, the researchers found that these shifts are driven by past economic shocks. They developed a way to analyze these changes efficiently and applied it to U.S. data, revealing strong evidence that monetary policy shifts are influenced by the economy's past experiences.