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Nominal Rigidities and The Real Effects of Monetary Policy in a Structural VAR Model

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  • Pham The Anh

    ()
    (Department of Economics, National Economics University, Vietnam)

Abstract

The paper proposes an empirical VAR for the UK open economy in order to measure the effects of monetary policy shocks from 1981 to 2003. The identification of the VAR structure is based on short-run restrictions that are consistent with the general implications of a New Keynesian model. The identification scheme used in the paper is successful in identifying monetary policy shocks and solving the puzzles and anomalies regarding the effects of monetary policy shocks. The estimated dynamic impulse responses and the forecast error variance decompositions show a consistency with the New Keynesian approach and other available theories.

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File URL: http://www.depocenwp.org/upload/pubs/TheAnh/The%20Anh_SVAR_depocen.pdf
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Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 06.

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Length: 35 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:dpc:wpaper:0607

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Keywords: Structural VAR; Nominal Rigidities; Monetary Policy Shocks; New Keynesian Theory;

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  1. Fabio C. Bagliano & Carlo A. Favero, . "Measuring Monetary Policy with VAR Models: an Evaluation," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 132, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(1), pages 147-180, February.
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  6. Olivier J. Blanchard & Mark W. Watson, 1987. "Are Business Cycles All Alike?," NBER Working Papers 1392, National Bureau of Economic Research, Inc.
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  8. Fung, Ben Siu-cheong & Kasumovich, Marcel, 1998. "Monetary shocks in the G-6 countries: Is there a puzzle?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 42(3), pages 575-592, October.
  9. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, Elsevier, vol. 36(5), pages 975-1000, June.
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  12. Garratt, A. & Lee, K. & Pesaran, M. H. & Shin, Y., 1998. "A Long-run Structural Macro-econometric Model of the UK," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9812, Faculty of Economics, University of Cambridge.
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  16. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, Econometric Society, vol. 48(1), pages 1-48, January.
  17. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
  18. Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(3), pages 561-586, June.
  19. Turner, Paul Michael, 1993. "A Structural Vector Autoregression Model of the UK Business Cycle," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 40(2), pages 143-64, May.
  20. Clements, Michael P. & Mizon, Grayham E., 1991. "Empirical analysis of macroeconomic time series : VAR and structural models," European Economic Review, Elsevier, Elsevier, vol. 35(4), pages 887-917, May.
  21. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, The MIT Press, edition 2, volume 1, number 0262232316, December.
  22. Jon Faust, 1998. "The robustness of identified VAR conclusions about money," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 610, Board of Governors of the Federal Reserve System (U.S.).
  23. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  24. Strongin, Steven, 1995. "The identification of monetary policy disturbances explaining the liquidity puzzle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 35(3), pages 463-497, June.
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