Date of Graduation
Doctor of Philosophy in Economics (PhD)
Second Committee Member
There has been a growing trend to utilize nonlinear models to analyze key issues in monetary policy and international macroeconomics. Using traditional linear models to understand 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 evaluate the inﬂation globalization hypothesis, which basically predicts that global factors will eventually replace the domestic determinants of inﬂation.
In the ﬁrst essay I develop abroad 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 Great Moderation as well as in the recent ﬁnancial crisis. The second essay uses a threshold methodology to investigate the importance of nonlinear eﬀects in the analysis of the inﬂation globalization hypothesis. Finally the third essay investigates the relationship between inﬂation and globalization, under an open-economy Phillips Curve framework, for a panel of OECD countries with a dynamic panel GMM methodology. Contrary to most of the previous literature, which ignores such nonlinearities, my new approach provides some interesting empirical evidence supportive of the eﬀect globalization has on a country’s inﬂation dynamics.
Ahmad, Saad, "Essays on Monetary Policy Rules and Inflation Dynamics" (2016). Theses and Dissertations. 1635.