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Monetary Shocks in the G-6 Countries: Is There a Puzzle?

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Author Info
Ben S.C. Fung
Marcel Kasumovich
Abstract

This paper attempts to reduce the uncertainty about the dynamics of the monetary transmission mechanism. Central to this attempt is the identification of monetary policy shocks. Recently, VAR approaches that use over-identifying restrictions have shown success in isolating such shocks. This paper examines monetary shocks identified by long-run cointegration restrictions and the assumption of long-run money neutrality in exactly identified VAR models across six industrialized countries. The short-run dynamics corresponding to a monetary shock can be interpreted as a monetary policy shock. The results suggest that the stock of money has an active role in the transmission mechanism.

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Paper provided by Bank of Canada in its series Working Papers with number 97-7.

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Length: 29 pages
Date of creation: 1997
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Handle: RePEc:bca:bocawp:97-7

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Related research
Keywords: Economic models; International topics; Transmission of monetary policy;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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