This paper shows that plausible modifications to the Taylor rule for monetary policy can help explain several empirical anomalies to the behavior of inflation in the new-Keynesian general equilibrium model. The key anomalies considered are (1) the persistence of inflation, both in reduced form...

This paper focuses on whether monetary policy has asymmetric effects. By building on the Markov switching model introduced by Hamilton (1989), we examine questions like: Does monetary policy have the same effect regardless of the current phase of economic fluctuations? Given that the economy is...