The Narrative Approach for the Identification of Monetary Policy Shocks in a Small Open Economy
AbstractThis 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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Bibliographic InfoPaper provided by Bank of Greece in its series Working Papers with number 55.
Length: 49 pages
Date of creation: Feb 2007
Date of revision:
Monetary Policy Shocks; Narrative Approach; UK.;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-CBA-2007-03-24 (Central Banking)
- NEP-MAC-2007-03-24 (Macroeconomics)
- NEP-MON-2007-03-24 (Monetary Economics)
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