We explore the macroeconomic impact of a compression in the long-term bond yield spread within the context of the Great Recession of 2007-2009 via a Bayesian time-varying parameter structural VAR. We identify a ‘pure’ spread shock which, leaving the short-term rate unchanged by construction,...

Based on standard New Keynesian models I show that policy counterfactuals based on the theoretical structural VAR representations of the models fail to reliably capture the impact of changes in the parameters of the Taylor rule on the (reduced-form) properties of the economy. Based on estimated...

We characterise the evolution of the U.S. unemployment-inflation trade-off since the late XIX century era via a Bayesian time-varying parameters structural VAR. The Great Inflation episode appears as historically unique along several dimensions. In particular, the shape of the ‘Phillips...

Policy counterfactuals based on estimated structural VARs routinely suggest that bringing Alan Greenspan back in the 1970s’ United States would not have prevented the Great Inflation. We show that a standard policy counterfactual suggests that the Bundesbank–which is near-universally...

This paper offers an alternative explanation for the behavior of postwar US inflation by measuring a novel source of monetary policy time-inconsistency due to Cukierman (2002). In the presence of asymmetric preferences, the monetary authorities end up generating a systematic inflation bias...

The announced primary objective of the European Central Bank is price stability. While no restrictive reference is given to how the goal should be reached, such a mandate can be thought as a concern to stabilize some relevant macroeconomic aggregates. Accordingly, we frame ECB monetary policy in...