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The "price puzzle" in the monetary transmission VARs with long-run restrictions

  • Krusec, Dejan

This study addresses the "price puzzle" -- a positive response of prices to monetary tightening in VAR models. By using long-run instead of the usual short-run restrictions on the US data including output, prices and interest rate, we find that monetary tightening had a negative effect on prices.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 106 (2010)
Issue (Month): 3 (March)
Pages: 147-150

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Handle: RePEc:eee:ecolet:v:106:y:2010:i:3:p:147-150
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  1. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
  2. Kyungho Jang & Masao Ogaki, 2001. "The Effects of Monetary Policy Shocks on Exchange Rates: A Structural Vector Error Correction Model Approach," Working Papers 01-02, Ohio State University, Department of Economics.
  3. Juselius, Katarina, 1998. "A Structured VAR for Denmark under Changing Monetary Regimes," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 400-411, October.
  4. Giordani, Paolo, 2001. "An Alternative Explanation of the Price Puzzle," Working Paper Series 125, Sveriges Riksbank (Central Bank of Sweden).
  5. Jordi Gali & J. David Lopez-Salido & Javier Valles, 2002. "Technology Shocks and Monetary Policy: Assessing the Fed's Performance," NBER Working Papers 8768, National Bureau of Economic Research, Inc.
  6. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
  7. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," FRB Atlanta Working Paper No. 94-2, Federal Reserve Bank of Atlanta.
  8. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  10. P.J.G. Vlaar, 2002. "Shocking the Eurozone," WO Research Memoranda (discontinued) 696, Netherlands Central Bank, Research Department.
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