The narrative approach for the identification of monetary policy shocks in small open economies
AbstractThis paper reviews 22 years of UK monetary policy (1971-1992) using official record from the Quarterly Bulletin of the Bank of England. A definition of policy shocks, which allows for the exclusion of cases of interest rate increases, which were unrelated to the monetary policy objectives, is used. The empirical analysis shows that output displays the usual hump-shaped response after a shock to the policy indicator but adjustment to pre-shock levels is slow. Other variables also display theory-consistent behaviour. Based on this policy indicator monetary policy is found to cause very limited output fluctuation in a four year horizon. The policy indicator is found to outperform the intervention rate as a measure of policy
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Bibliographic InfoPaper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 24.
Date of creation: 02 Feb 2007
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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-2007-04-09 (All new papers)
- NEP-CBA-2007-04-09 (Central Banking)
- NEP-HIS-2007-04-09 (Business, Economic & Financial History)
- NEP-MAC-2007-04-09 (Macroeconomics)
- NEP-MON-2007-04-09 (Monetary Economics)
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