The monetary transmission mechanism: Evidence from the G-7 countries
In this paper we compare the effects of monetary policy on output and prices in the G-7 countries using a parsimonious macroeconometric model comprising, output, prices and a short-term interest rate. We identify monetary policy shocks by assuming that they do not affect real output instantaneously (within the quarter) or in the long run and implement these restrictions using a sequential instrumental variables technique. We show that the so-called pricepuzzle which has been noticed in the large VAR-literature in which only shortrun restrictions are used, disappears. This suggests that the puzzle is due to the fact that the use of only short-run identifying restrictions does not properly discriminate between contractionary aggregate supply shocks and monetary policy shocks. We conclude that the effects of a standardised monetary policy action are very similar across countries.
|Date of creation:||Apr 1995|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (41) 61 - 280 80 80
Fax: (41) 61 - 280 91 00
Web page: http://www.bis.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
- Ben Bernanke, 1990.
"The Federal Funds Rate and the Channels of Monetary Transnission,"
NBER Working Papers
3487, National Bureau of Economic Research, Inc.
- Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September.
- Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
- Jon Faust & Eric M. Leeper, 1994.
"When do long-run identifying restrictions give reliable results?,"
International Finance Discussion Papers
462, Board of Governors of the Federal Reserve System (U.S.).
- Faust, Jon & Leeper, Eric M, 1997. "When Do Long-Run Identifying Restrictions Give Reliable Results?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 345-53, July.
- Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," Working Paper 94-2, Federal Reserve Bank of Atlanta.
- Bernanke, Ben S., 1986.
"Alternative explanations of the money-income correlation,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 25(1), pages 49-99, January.
- Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
- Matthew Shapiro & Mark Watson, 1988.
"Sources of Business Cycles Fluctuations,"
in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156
National Bureau of Economic Research, Inc.
- Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," NBER Working Papers 2589, National Bureau of Economic Research, Inc.
- Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," Cowles Foundation Discussion Papers 870, Cowles Foundation for Research in Economics, Yale University.
- Olivier Jean Blanchard & Danny Quah, 1988.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances,"
NBER Working Papers
2737, National Bureau of Economic Research, Inc.
- Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
- Gali, Jordi, 1992.
"How Well Does the IS-LM Model Fit Postwar U.S. Data,"
The Quarterly Journal of Economics,
MIT Press, vol. 107(2), pages 709-38, May.
- Tom Doan, . "RATS programs to replicate Gali's QJE 1992 results," Statistical Software Components RTZ00063, Boston College Department of Economics.
- John M. Roberts, 1990. "The sources of business cycles: a monetarist interpretation," Working Paper Series / Economic Activity Section 108, Board of Governors of the Federal Reserve System (U.S.).
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Sims, Christopher A., 1992.
"Interpreting the macroeconomic time series facts : The effects of monetary policy,"
European Economic Review,
Elsevier, vol. 36(5), pages 975-1000, June.
- 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.
- Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
When requesting a correction, please mention this item's handle: RePEc:bis:biswps:26. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Beslmeisl)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.