TY  - JOUR
AU  - Gali,Jordi
AU  - Lopez-Salido,J. David
AU  - Valles,Javier
TI  - Technology Shocks and Monetary Policy: Assessing the Fed's Performance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8768
PY  - 2002
Y2  - February 2002
UR  - http://www.nber.org/papers/w8768
L1  - http://www.nber.org/papers/w8768.pdf
N1  - Author contact info:
Jordi Gali
Centre de Recerca en Economia Internacional (CREI)
Ramon Trias Fargas 25
08005 Barcelona
SPAIN
Tel: 011-34-93-5422754
Fax: 011-34-93-5421860
E-Mail: jgali@crei.cat

Javier Valles
Research Dept.
Banco de Espana
Alcala 50
28014 Madrid SPAIN
E-Mail: jvalles@presidencia.gob.es
AB  - The purpose of the present paper is twofold. First, we characterize the Fed's systematic response to technology shocks and its implications for U.S. output, hours and inflation. Second, we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule (including the optimal one) in the context of a standard business cycle model with sticky prices. Our main results can be described as follows: First, we detect significant differences across periods in the response of the economy (as well as the Fed's) to a technology shock. Second, the Fed's response to a technology shock in the Volcker-Greenspan period is consistent with an optimal monetary policy rule. Third, in the pre-Volcker period the Fed's policy tended to over stabilize output at the cost of generating excessive inflation volatility. Our evidence reinforces recent results in the literature suggesting an improvement in the Fed's performance.
ER  -