Monetary Policy Responses to Shocks

Abstract: Most countercyclical monetary policy research has focused on the Fed's responses to fluctuations in the business cycle. The benchmark for countercyclical analysis is whether monetary policy adjusts appropriately to smooth economic fluctuations and achieves the Fed's dual mandate of low inflation and maximum employment. In addition to cyclical fluctuations, history is replete with an array of shocks and disturbances that have jarred economic activity. This paper analyzes the modern history of various types of shocks and how the Fed has responded to them.

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