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Transmission Lags of Monetary Policy: A Meta-Analysis

  • Tomas Havranek

    ()

  • Marek Rusnak

The transmission of monetary policy to the economy is generally thought to have long and variable lags. In this paper we quantitatively review the modern literature on monetary transmission in transition and developed countries to provide stylized facts on the average lag length and the sources of variability. We collect 67 published studies and examine when prices bottom out after a monetary contraction. The average transmission lag is 29 months, and the maximum decrease in prices reaches 0.9% on average after a one-percentagepoint hike in the policy rate. Transmission lags are longer in developed economies (25{50 months) than in transition economies (10{20 months). We nd that the factor most e ective in explaining this heterogeneity is nancial development: greater nancial development is associated with slower transmission. Our results also suggest that researchers who use monthly data instead of quarterly data report systematically faster transmission.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1038.

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Date of creation: 01 Oct 2012
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Handle: RePEc:wdi:papers:2012-1038
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