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Revisiting the effects of conventional and unconventional monetary policies

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  • Eul Noh

Abstract

This paper extends the discussion on the effects of the two distinctive monetary surprises in the literature. First, we show that the proxy of conventional monetary shock Granger causes the endogenous variables in the vector autoregressive model. Second, we provide evidence that the existing model can be exposed to a weak instrument problem. With our alternative model mitigating these concerns, the second monetary shock can be interpreted as unconventional monetary news in general. The estimation results show contractionary effect of the unconventional policy. We find increases in output after a positive conventional monetary surprise, suggesting an important Fed's information effect.

Suggested Citation

  • Eul Noh, 2024. "Revisiting the effects of conventional and unconventional monetary policies," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(5), pages 943-951, August.
    • Handle: RePEc:wly:japmet:v:39:y:2024:i:5:p:943-951
    DOI: 10.1002/jae.3052
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    References listed on IDEAS

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    Cited by:

    1. Yang Yang & Ren Zhang, 2025. "Combining Proxies and Narrative Sign Restrictions: Revisiting the Effects of Technology Shocks," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 40(5), pages 554-568, August.
    2. Nguyen, Lam, 2025. "Bayesian inference in proxy SVARs with incomplete identification: Re-evaluating the validity of monetary policy instruments," Journal of Monetary Economics, Elsevier, vol. 155(C).
    3. Allayioti, Anastasia & Gόrnicka, Lucyna & Holton, Sarah & Martínez Hernández, Catalina, 2024. "Monetary policy pass-through to consumer prices: evidence from granular price data," Working Paper Series 3003, European Central Bank.

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