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Monetary disturbances matter for business fluctuations in the G-7

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  • Canova, Fabio
  • Nicolo, Gianni De

Abstract

This paper examines the importance of monetary disturbances for cyclical fluctuations in real activity and inflation. It employs a novel identification approach which uses the sign of the cross-correlation function in response to shocks to assign a structural interpretation to orthogonal innovations. We find that monetary shocks significantly drive output and inflation cycles in all G-7 countries; that they are the dominant source of fluctuations in three of the seven countries; that they contain an important policy component, and that their impact is time varying.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 49 (2002)
Issue (Month): 6 (September)
Pages: 1131-1159

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Handle: RePEc:eee:moneco:v:49:y:2002:i:6:p:1131-1159

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Web page: http://www.elsevier.com/locate/inca/505566

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  24. Leeper, Eric M. & Gordon, David B., 1992. "In search of the liquidity effect," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 341-369, June.
  25. Canova, Fabio & Pina, Joaquim Pivis, 1999. "Monetary Policy Misspecification in VAR Models," CEPR Discussion Papers 2333, C.E.P.R. Discussion Papers.
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  1. > Econometrics > Time Series Models > VAR Models > Sign Restrictions
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