Munich Personal RePEc Archive

On the Welfare Costs of Monetary Policy

Nlemfu Mukoko, Jean Blaise (2016): On the Welfare Costs of Monetary Policy.


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This paper analyses the implications of monetary policy changes on the welfare in the U.S economy over the pre-1984 and post-1984 periods. We use a New-Keynesian model with trend inflation based on Ascari, Phaneuf and Sims (2015). First, our results show that the welfare costs respond symmetrically to a rise and a decline in trend inflation, trend growth and the level of volatility of output, output growth and inflation over the sample periods. Second, we find that changes in monetary policy and in trend inflation across the two subsamples play an important role in the shift of macroeconomic variables volatilities unconditionally and conditionally to neutral technology, marginal efficiency of investment and monetary shocks.

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