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Using Dollarized Countries to Analyze the Effects of US Monetary Policy Shocks

Listed author(s):
  • Tim Willems

    (University of Amsterdam)

Identifying monetary policy shocks is difficult. Therefore, instead of trying to do this perfectly, this paper exploits a natural setting that reduces the consequences of shock misidentification. It does so by inferring from the responses of variables in dollarized countries. They import US monetary policy just as genuine US states do, but have the advantage that non-monetary US shocks are not imported perfectly. Consequently, this setting reduces the role played by any non-monetary US shocks, while leaving the effects of the true monetary shocks unaffected. Results suggest that prices fall after monetary contractions; output does not show a clear response.

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File URL: https://economicdynamics.org/meetpapers/2011/paper_200.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 200.

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Date of creation: 2011
Handle: RePEc:red:sed011:200
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  18. Carlstrom, Charles T. & Fuerst, Timothy S. & Paustian, Matthias, 2009. "Monetary policy shocks, Choleski identification, and DNK models," Journal of Monetary Economics, Elsevier, vol. 56(7), pages 1014-1021, October.
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