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Leaning into the Wind: A Structural VAR Investigation of UK Monetary Policy

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  • Andrew Mountford

Abstract

This paper adapts Uhlig's [Journal of Monetary Economics (2005) forthcoming] sign restriction identification methodology to investigate the effects of UK monetary policy using a structural vector autoregression (VAR). It shows that shocks which can reasonably be described as monetary policy shocks have played only a small role in the total variation of UK monetary and macroeconomic variables. Most of the variation in UK monetary variables has been due to their systematic reaction to other macroeconomic shocks, namely non‐monetary aggregate demand, aggregate supply, and oil price shocks. We also find, without imposing any long run identifying restrictions, that aggregate supply shocks have permanent effects on output.

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  • Andrew Mountford, 2005. "Leaning into the Wind: A Structural VAR Investigation of UK Monetary Policy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(5), pages 597-621, October.
    • Handle: RePEc:bla:obuest:v:67:y:2005:i:5:p:597-621
    DOI: 10.1111/j.1468-0084.2005.00133.x
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