Does US monetary policy respond to oil and food prices?
Journal of International Money and Finance
© 2016 Elsevier Ltd. All rights reserved.
Reason for embargo
A common view is that US monetary policy does not respond to changes in volatile energy and food prices. Despite this view, the popular New Keynesian models assume Taylor-type rules under which the short-term interest rates react to headline inflation. This paper evaluates the fit of alternative Taylor rules within an estimated New Keynesian model. A main finding is that the US central bank includes energy and food prices in its policy rule, although the weight assigned to these prices is much smaller than their share in the economy.
This is the author accepted manuscript. The final version is available from Elsevier via the DOI in this record.
Vol. 72, pp. 118 - 126