The monetary transmission mechanism: an empirical framework
AbstractThis paper describes an empirical framework for analyzing the monetary transmission mechanism through which changes in monetary policy affect real GDP and inflation. The framework reflects the work of a large number of empirical researchers who have built econometric models of the impacts of monetary policy on real interest rates and real exchange rates. The framework is international in its scope and emphasizes the prices of financial assets rather than the quantities of these assets. In most cases expectations are assumed to be rational and the prices of goods and services are temporarily rigid. The paper concludes with a comparison of this empirical framework with a theoretical framework proposed by Milton Friedman 25 years ago.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 95-07.
Date of creation: 1995
Date of revision:
Publication status: Published in Conference on Monetary Policy in a Changing Financial Environment ; Journal of Economic Perspectives (Fall 1995, v. 9, no. 4, p11-26)
Other versions of this item:
- John B. Taylor, 1995. "The Monetary Transmission Mechanism: An Empirical Framework," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 11-26, Fall.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bennett T. McCallum, 1993.
"Specification and Analysis of a Monetary Policy Rule for Japan,"
Monetary and Economic Studies,
Institute for Monetary and Economic Studies, Bank of Japan, vol. 11(2), pages 1-45, December.
- Bennett T. McCallum, 1993. "Specification and Analysis of a Monetary Policy Rule for Japan," NBER Working Papers 4449, National Bureau of Economic Research, Inc.
- Friedman, Milton, 1970.
"A Theoretical Framework for Monetary Analysis,"
Journal of Political Economy,
University of Chicago Press, vol. 78(2), pages 193-238, March-Apr.
- Friedman, Milton, 1972. "Comments on the Critics," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 906-50, Sept.-Oct.
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