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Percent from Steady State
Response of Inflation to Preference Shock
0.1
0.08
0.06
0.04
0.02
0
0
4
8
12
16
20
Pre-1979
24
28
32
36
40
Post-1979
Percent from Steady State
Response of Inflation to Technology Shock
0.1
0
-0.1
-0.2
-0.3
-0.4
0
4
8
12
16
20
Pre-1979
FIGURE 1
24
28
32
Post-1979
36
40
Percent from Steady State
Response of Interest Rate to Policy Shock
0.04
0.03
0.02
0.01
0
0
1
2
3
4
5
6
Pre-1979
7
8
9
10 11 12
Post-1979
Percent from Steady State
Response of Output to Policy Shock
0.2
0
-0.2
-0.4
-0.6
0
1
2
3
4
5
6
Pre-1979
FIGURE 2
7
8
9
Post-1979
10 11 12