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Monetary policy effects on output and exchange rates: Results from US, UK and Japan

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Author Info

  • Mustafa Caglayan

    ()
    (Department of Economics, The University of Sheffield)

  • Kostas Mouratidis

    ()
    (Department of Economics, The University of Sheffield)

  • Elham Saeidinezhad

    (Department of Economics, The University of Sheffield)

Abstract

We investigate the effects of "contractionary" monetary shocks by imposing sign restrictions on the impulse responses of macroeconomic variables up to six months while allowing industrial production and exchange rate to be completely determined by the data. We show that i) the effect of an adverse monetary policy shock on industrial production is ambiguous; ii) there is price puzzle for Japan and UK which we conjecture as an outcome of excessive bank lending and poor regulation but not of passive monetary policy; ii) there is delayed overshooting puzzle for Japan and the exchange rate puzzle for the UK and the US.

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2011_016.html
File Function: First version, 2011
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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2011016.

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Length: 26 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:shf:wpaper:2011016

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Related research

Keywords: monetary shocks; business cycles; exchange rate puzzle; price puzzle; vector autoregression;

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