Through the lens of the Taylor rule, New Keynesian models suggest that a central bank can enhance the macroeconomic stability by aiming for a low inflation target and by strengthening the response to changes in inflation, but these two strategies are difficult to be identified empirically.Using...

This paper investigates to what extent the declines of the U.S. real GDP are permanent during the Great Recession. Our trend-cycle decomposition indicates that the Great Recession is associated with a substantial permanent loss in the real GDP manifested in decelerated mean growth rate and...

Through the lens of the Taylor rule, this paper is concerned with the circumstances in which the Fed would change its behavior. A Bayesian MCMC method is proposed to deal with a switching Taylor rule robust to zero lower bound and heteroscedasticity. The posterior results from Markov-switching...