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What does the single monetary policy do? A SVAR benchmark for the European Central Bank

  • Monticello, Carlo
  • Tristani, Oreste

This paper puts forward a characterization of the structural features of the economic system relevant to the monetary-policy decisions of the European Central Bank. The econometric analysis adopts a parsimonious VAR representation of three key macroeconomic variables (interest rates, prices and GDP) aggregated across countries to obtain area-wide time series. The exogenous disturbances driving the multivariate system are identified imposing restrictions based on economic theory. The dynamic properties of the estimated models are analyzed and compared with the available evidence for the US. The robustness of this characterization is corroborated by the estimates from a different sample period and by the findings from an alternative model that singles out German monetary policy in view of its anchor role within the ERM. JEL Classification: C32, E58

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Paper provided by European Central Bank in its series Working Paper Series with number 0002.

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Date of creation: May 1999
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Handle: RePEc:ecb:ecbwps:19990002
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  18. Vlaar, Peter J.G., 2004. "On The Asymptotic Distribution Of Impulse Response Functions With Long-Run Restrictions," Econometric Theory, Cambridge University Press, vol. 20(05), pages 891-903, October.
  19. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August.
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  27. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
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  29. 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.
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