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The Narrative Approach for the Identification of Monetary Policy Shocks in a Small Open Economy

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  • Eleni Angelopoulou

    () (Bank of Greece and Athens University of Economics and Business)

Abstract

This paper reviews 22 years of UK monetary policy in the pre-inflation targeting period (1971-1992) using official record from the Bank of England Quarterly Bulletin. A transparent definition of policy episodes is used. The empirical analysis shows that output displays the usual hump-shaped response after a shock to the policy indicator. All variables display theory-consistent behaviour. Monetary policy and exchange rate volatility are found to cause substantial output fluctuation in a four year horizon. The “narrative model” extended to a small open economy compares well with a structural VAR.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200755.pdf
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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 55.

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Length: 49 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:bog:wpaper:55

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Web page: http://www.bankofgreece.gr
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Related research

Keywords: Monetary Policy Shocks; Narrative Approach; UK.;

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  1. William Poole, 2008. "Rules-of-thumb for guiding monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 447-498.
  2. Dow, J. C. R. & Saville, I. D., 1990. "A Critique of Monetary Policy: Theory and British Experience," OUP Catalogue, Oxford University Press, number 9780198283195, September.
  3. Christina D. Romer & David H. Romer, 1990. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Working Papers 2966, National Bureau of Economic Research, Inc.
  4. Ho-Chuan (River) Huang & Chung-Hua Shen, 2002. "Estimation of Taiwan’s binary monetary policy reaction function," Journal of Economic Studies, Emerald Group Publishing, vol. 29(3), pages 222-239, September.
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Cited by:
  1. Stephan Barisitz, 2008. "Banking Transformation (1989 - 2006) in Central and Eastern Europe - With Special Reference to Balkans," Working Papers 78, Bank of Greece.
  2. Peter Bernholz, 2008. "Government Bankruptcy of Balkan Nations and their Consequences for Money and Inflation before 1914: A Comparative Analysis," Working Papers 74, Bank of Greece.
  3. Apostolides, Alexander, 2008. "“How Similar to South-Eastern Europe were the Islands of Cyprus and Malta in terms of Agricultural Output and Credit? Evidence during the Interwar Period”," MPRA Paper 9968, University Library of Munich, Germany.
  4. Zarko Lazarevic, 2008. "Banking Performance in South-Eastern Europe During the Interwar Period," Working Papers 79, Bank of Greece.
  5. Roumen Avramov & Dragana Gnjatovic, 2008. "Stabilization Policies in Bulgaria and Yugoslavia During Communism's Terminal Years : 1980s Economic Visions in Retrospect," Working Papers 81, Bank of Greece.

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