The durable goods sector is much more interest sensitive than the non-durables sector, and these sectoral differences have important implications for monetary policy. In this paper, we perform VAR analysis of quarterly US data and find that a monetary policy innovation has a peak impact on...

How monetary policy should be set optimally when the structure of the economy exhibits inflation persistence is an important question for policy makers. This paper provides an overview of the implications of inflation persistence for the design of monetary policy.