The Price Puzzle: Fact or Artefact?
AbstractA conventional finding of recursive structural VAR (SVAR) analyses is the price puzzle namely the positive relationship between interest rates and inflation. We employ a Markov regime-switching structural VAR (MRS-SVAR) to investigate whether the price puzzle is present at regimes where there is violation of the Taylor principle. Our results suggest that the price puzzle is a regime-dependent phenomenon driven by passive monetary policy and Choleski identifying restrictions.
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Bibliographic InfoPaper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2013008.
Length: 10 pages
Date of creation: 2013
Date of revision:
monetary policy; price puzzle; Markov regime-switching; structural VAR;
Find related papers by JEL classification:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-04 (All new papers)
- NEP-MON-2013-06-04 (Monetary Economics)
- NEP-PKE-2013-06-04 (Post Keynesian Economics)
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