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Changing Effects of Monetary Policy in the U.S. –Evidence from a Time-Varying Coefficient VAR

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Christian Melzer
Thorsten Neumann
Abstract

We estimate a time-varying coefficient VAR model for the U.S. economy to analyse (i) if the effect of monetary policy on output has been changing systematically over time, and (ii) if monetary policy has asymmetric effects over the business cycle. We find that the impact of monetary policy shocks has been gradually declining over the sample period (1962-2002), as some theories of the monetary transmission mechanism imply. In addition, our results indicate that the effects of monetary policy are greater in a recession than in a boom.

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 144.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:144

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

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