Journal of Monetary Economics 2015 DOI: 10.1016/j.jmoneco.2014.09.003 View full text
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Lieven Baele, Geert Bekaert, Seonghoon Cho, Koen Inghelbrecht, Antonio Moreno

Abstract: A New-Keynesian macro model is estimated accommodating regime-switching behavior in monetary policy and macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. Output and inflation shocks shift to the low volatility regime around 1985 and 1990, respectively. Monetary Policy experiences multiple shifts with an important role in shaping macro volatility. New estimates of the onset and demise of the Great Moderation are provided and the relative role played b…

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