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This article provides an estimation method to decompose monetary policy innovations into persistent and transitory … evolution of monetary shocks. This alternative formulation allows us to perform the maximum likelihood estimation for all the …
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Recent empirical evidence by Fair (2002,2005) and Giordani (2003) shows that a positive inflation shock with the nominal interest rate held constant has contractionary effects. These results cannot be reconciled with the standard 'New Synthesis' literature. This paper reconsiders the effects of...
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