We present a procedure for evaluating ex ante the effects of alternative paths of a monetary policy tool (the federal funds rate in our illustrations) on output and the price level within a variant of a widely used vector autoregressive model of the U.S. economy. This exercise is a supplement...

This study compares the effects of monetary policy shocks on the macroeconomy using four different procedures for identifying policy shocks that use contemporaneous restrictions and a procedure that uses long-run restrictions. Impulse response functions are computed using the same vector...

We suggest a new way of computing the inflation-output variability tradeoff under inflation forecast targeting. Our approach is based on dynamic, stochastic simulations of the average inflation rate over a two-year horizon using the moving average representation of a vector autoregressive (VAR)...