The Price Puzzle: Fact or Artefact?
A conventional finding of recursive structural VAR (SVAR) analyses is the price puzzle namely the positive relationship between interest rates and inflation. We employ a Markov regime-switching structural VAR (MRS-SVAR) to investigate whether the price puzzle is present at regimes where there is violation of the Taylor principle. Our results suggest that the price puzzle is a regime-dependent phenomenon driven by passive monetary policy and Choleski identifying restrictions.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: 9 Mappin Street, SHEFFIELD, S1 4DT|
Phone: +44 114 222 3399
Fax: + 44 (0)114 222 3458
Web page: http://www.shef.ac.uk/economics
More information through EDIRC
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.:
- Luca Benati & Paolo Surico, 2009.
"VAR Analysis and the Great Moderation,"
American Economic Review,
American Economic Association, vol. 99(4), pages 1636-52, September.
- Roger E. A. Farmer & Daniel F. Waggoner & Tao Zha, 2008.
"Minimal state variable solutions to Markov-switching rational expectations models,"
FRB Atlanta Working Paper
2008-23, Federal Reserve Bank of Atlanta.
- Farmer, Roger E.A. & Waggoner, Daniel F. & Zha, Tao, 2011. "Minimal state variable solutions to Markov-switching rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 2150-2166.
- Roger E. A. Farmer & Daniel F. Waggoner & Tao Zha, 2010. "Minimal State Variable Solutions to Markov-switching Rational Expectations Models," Emory Economics 1003, Department of Economics, Emory University (Atlanta).
- 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.
- Troy A. Davig & Eric M. Leeper, 2005.
"Generalizing the Taylor principle,"
Research Working Paper
RWP 05-13, Federal Reserve Bank of Kansas City.
- Troy Davig & Eric M. Leeper, 2006. "Generalizing the Taylor Principle," Caepr Working Papers 2006-001, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- Troy Davig & Eric M. Leeper, 2005. "Generalizing the Taylor Principle," NBER Working Papers 11874, National Bureau of Economic Research, Inc.
- Luca Benati, 2008.
"The "Great Moderation" in the United Kingdom,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 40(1), pages 121-147, 02.
- 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.
- Efrem Castelnuovo & Paolo Surico, 2009.
"Monetary Policy, Inflation Expectations and the Price Puzzle,"
"Marco Fanno" Working Papers
0101, Dipartimento di Scienze Economiche "Marco Fanno".
- Efrem Castelnuovo & Paolo Surico, 2010. "Monetary Policy, Inflation Expectations and The Price Puzzle," Economic Journal, Royal Economic Society, vol. 120(549), pages 1262-1283, December.
- Castelnuovo, Efrem & Surico, Paolo, 2009. "Monetary policy, inflation expectations and the price puzzle," Research Discussion Papers 30/2009, Bank of Finland.
- Fabio Canova & Gianni De Nicolo, 2000.
"Monetary disturbances matter for business fluctuations in the G-7,"
International Finance Discussion Papers
660, Board of Governors of the Federal Reserve System (U.S.).
- Canova, Fabio & Nicolo, Gianni De, 2002. "Monetary disturbances matter for business fluctuations in the G-7," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1131-1159, September.
When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2013008. 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: (Jacob Holmes)
If references are entirely missing, you can add them using this form.