tailieunhanh - Accounting undergraduate Honors theses: Essays on monetary policy rules and inflation dynamics

My aim in accounting for potential nonlinearity is to get a better understanding of the policy makers’ opportunistic approach to monetary policy and evaluate the inflation globalization hypothesis, which basically predicts that global factors will eventually replace the domestic determinants of inflation. | Accounting undergraduate Honors theses: Essays on monetary policy rules and inflation dynamics University of Arkansas, Fayetteville ScholarWorks@UARK Theses and Dissertations 8-2016 Essays on Monetary Policy Rules and Inflation Dynamics Saad Ahmad University of Arkansas, Fayetteville Follow this and additional works at: Part of the Macroeconomics Commons Recommended Citation Ahmad, Saad, "Essays on Monetary Policy Rules and Inflation Dynamics" (2016). Theses and Dissertations. 1635. This Dissertation is brought to you for free and open access by ScholarWorks@UARK. It has been accepted for inclusion in Theses and Dissertations by an authorized administrator of ScholarWorks@UARK. For more information, please contact scholar@, ccmiddle@. Abstract There has been a growing trend to utilize nonlinear models to analyze key issues in mon- etary policy and international macroeconomics. Using traditional linear models to under- stand nonlinear relationships can often lead to inaccurate inference and erroneous policy recommendations. The three essays in this dissertation explore nonlinearity in the Federal Reserve’s policy response as well as between a country’s inflation dynamics and integration in the global economy. My aim in accounting for potential nonlinearity is to get a better understanding of the policy makers’ opportunistic approach to monetary policy and evalu- ate the inflation globalization hypothesis, which basically predicts that global factors will eventually replace the domestic determinants of inflation. In the first essay I develop a broad nonlinear Taylor rule framework, in conjunction with real- time data, to examine the Fed’s policy response during the Great Moderation. My flexible framework is also able to convincingly show that the Fed departed from the Taylor rule during key periods in the