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Measuring the Effects of Monetary Policy in the Euro Area: The Role of Anticipated Policy

  • Jan Gottschalk
  • Florian Höppner
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    This paper investigates within a SVAR framework the effects of anticipated monetary policy in the euro area. Building on a procedure recently proposed by Cochrane which yields the response of output to an anticipated monetary policy impulse, we show that in the past twenty years anticipated monetary policy has had a considerable influence on output. Moreover, we compute the output effects of the systematic monetary policy response to aggregate demand and supply shocks and find that monetary policy pursues a counter-cyclical policy in response to demand shocks and, despite considerable lags, is pro-cyclical with regard to supply shocks.

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/measuring-the-effects-of-monetary-policy-in-the-euro-area-the-role-of-anticipated-policy/kap1074.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1074.

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    Length: 82 pages
    Date of creation: Aug 2001
    Date of revision:
    Handle: RePEc:kie:kieliw:1074
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    1. Bagliano, Fabio C. & Favero, Carlo A., 1998. "Measuring monetary policy with VAR models: An evaluation," European Economic Review, Elsevier, vol. 42(6), pages 1069-1112, June.
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    5. Gerlach, Stefan & Smets, Frank, 1999. "Output gaps and monetary policy in the EMU area1," European Economic Review, Elsevier, vol. 43(4-6), pages 801-812, April.
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    8. John H. Cochrane, 1995. "What do the VARs Mean?: Measuring the Output Effects of Monetary Policy," NBER Working Papers 5154, National Bureau of Economic Research, Inc.
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    11. Jeanne, Olivier, 1998. "Generating real persistent effects of monetary shocks: How much nominal rigidity do we really need?," European Economic Review, Elsevier, vol. 42(6), pages 1009-1032, June.
    12. Rudebusch, G.D., 1996. "Do Measures of Monetary Policy in a VAR Make Sense?," Papers 269, Banca Italia - Servizio di Studi.
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    15. Bennett T. McCallum, 1987. "The case for rules in the conduct of monetary policy: a concrete example," Economic Review, Federal Reserve Bank of Richmond, issue Sep, pages 10-18.
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    20. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
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    22. Frederic S. Mishkin, 1980. "Does Anticipated Monetary Policy Matter? An Econometric Investigation," NBER Working Papers 0506, National Bureau of Economic Research, Inc.
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    24. Robert J. Barro, 1976. "Unanticipated Money Growth and Unemployment in the United States," Working Papers 234, Queen's University, Department of Economics.
    25. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 529-38, May.
    26. Bernanke, Ben S. & Gertler, Mark & Waston, Mark, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Working Papers 97-25, C.V. Starr Center for Applied Economics, New York University.
    27. Monticello, Carlo & Tristani, Oreste, 1999. "What does the single monetary policy do? A SVAR benchmark for the European Central Bank," Working Paper Series 0002, European Central Bank.
    28. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
    29. Gerlach, Stefan & Schnabel, Gert, 2000. "The Taylor rule and interest rates in the EMU area," Economics Letters, Elsevier, vol. 67(2), pages 165-171, May.
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    34. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
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