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Inflation Regimes and Monetary Policy Shocks: A High-Frequency Investigation

Axner, Oskar LU (2025) NEKP01 20251
Department of Economics
Abstract
This thesis investigates how the effectiveness of monetary policy varies across high- and low-inflation regimes by examining high-frequency monetary policy shocks in the eurozone, Sweden, and the United Kingdom from August 2004 to August 2024. Using local projection with regime-dependent specifications, it assesses the varying impact of contractionary shocks in low- and high-inflation environments. The findings reveal that inflation responds more strongly, and sometimes more persistently, to monetary policy tightening during high-inflation periods, which is consistent across countries and robust to alternative definitions of shocks and inflation regimes. The results underscore the importance of considering inflation regimes when conducting... (More)
This thesis investigates how the effectiveness of monetary policy varies across high- and low-inflation regimes by examining high-frequency monetary policy shocks in the eurozone, Sweden, and the United Kingdom from August 2004 to August 2024. Using local projection with regime-dependent specifications, it assesses the varying impact of contractionary shocks in low- and high-inflation environments. The findings reveal that inflation responds more strongly, and sometimes more persistently, to monetary policy tightening during high-inflation periods, which is consistent across countries and robust to alternative definitions of shocks and inflation regimes. The results underscore the importance of considering inflation regimes when conducting monetary policy and point to the need for adaptable policy frameworks in an increasingly uncertain macroeconomic environment. (Less)
Please use this url to cite or link to this publication:
author
Axner, Oskar LU
supervisor
organization
course
NEKP01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Monetary Policy Shocks, Inflation Regimes, High-Frequency Identification, Local Projection.
language
English
id
9193071
date added to LUP
2025-09-12 10:50:28
date last changed
2025-09-12 10:50:28
@misc{9193071,
  abstract     = {{This thesis investigates how the effectiveness of monetary policy varies across high- and low-inflation regimes by examining high-frequency monetary policy shocks in the eurozone, Sweden, and the United Kingdom from August 2004 to August 2024. Using local projection with regime-dependent specifications, it assesses the varying impact of contractionary shocks in low- and high-inflation environments. The findings reveal that inflation responds more strongly, and sometimes more persistently, to monetary policy tightening during high-inflation periods, which is consistent across countries and robust to alternative definitions of shocks and inflation regimes. The results underscore the importance of considering inflation regimes when conducting monetary policy and point to the need for adaptable policy frameworks in an increasingly uncertain macroeconomic environment.}},
  author       = {{Axner, Oskar}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Inflation Regimes and Monetary Policy Shocks: A High-Frequency Investigation}},
  year         = {{2025}},
}