Carlos A. Rodríguez
Descripción:
Through the structural decomposition developed by Blanchard and Quah (1989), this paper studies the effects of the impulses associated with the Taylors rule of the United States and the supply and demand in Puerto Rico on the dynamics of the unemployment and inflation on the Island. According to the results, in the short run, unemployment responds mostly to the unanticipated shocks of the monetary policy rule in the United States and the supply shocks. Inflation also responds to this rule and the impulses associated with aggregate demand. In the long run, unemployment is declining, and inflation is accelerating mainly in the face of an unanticipated expansion of U.S. monetary policy caused by the establishment of the Taylor rule.