One strand of the recent literature on the monetary transmission process has focused upon the weak empirical evidence of a liquidity effect in the U.S. This study uses structural VAR methods to reexamine the liquidity effect

Taylor (1979) posited that a central bank faces a tradeoff between the volatility of the output gap and volatility of inflation; this trade-off has become known as the Taylor curve. Thus, the Taylor curve necessitates that the correlation between the volatilities of inflation and the output gap...