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An analysis of the transmission mechanism of monetary policy in Ireland

  • Don Bredin
  • Gerard O'Reilly

This paper examines the impact of a monetary policy shock on output, prices and the exchange rate for Ireland during its participation in the EMS. The paper draws on recent techniques used in the structural vector autoregression literature. Results suggest that an exogenous temporary increase in the short-term interest rate leads to a decline in output and prices with the latter responding more sluggishly. In addition, a higher interest rate leads to an immediate appreciation of the domestic exchange rate and a subsequent depreciation of the currency. Exchange rate or forward bias puzzle, which are prevalent in other studies, are not found. The robustness of these results is checked under a number of alternative identifications schemes

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 36 (2004)
Issue (Month): 1 ()
Pages: 49-58

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Handle: RePEc:taf:applec:v:36:y:2004:i:1:p:49-58
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