Monetary Policy Reestimated

63 Pages Posted: 16 Jun 2021 Last revised: 3 Mar 2023

See all articles by Alina Arefeva

Alina Arefeva

UW Madison - Wisconsin School Business

Nikolay Arefyev

National Research University Higher School of Economics

Date Written: June 14, 2021


We propose to use a few assumptions on an abstract dynamic stochastic general equilibrium (DSGE) model to identify the monetary policy rule and shock. Using the estimated monetary policy rule, we argue that the Federal Reserve implemented the Friedman policy of steady money growth before the Great Moderation. During the Great Moderation, the monetary policy followed the Taylor rule with interest rate smoothing, where the type of smoothing is more general than that discussed in the literature. The estimated impulse response functions to the monetary policy shock are large and significant, even on the Great Moderation data.

Keywords: identification, monetary policy, Great Moderation, Great Inflation, Friedman policy, Taylor rule, interest rate smoothing, housing starts

JEL Classification: E52, C30, N1, R31

Suggested Citation

Arefeva, Alina and Arefyev, Nikolay, Monetary Policy Reestimated (June 14, 2021). Available at SSRN: or

Alina Arefeva (Contact Author)

UW Madison - Wisconsin School Business ( email )

975 University Avenue
Madison, WI 53706
United States


Nikolay Arefyev

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017

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