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Monetary Policy Effect on the Business Cycle Fluctuations: Output vs. Index Measures of the Cycle

Author

Listed:
  • Oleg Korenok

    (Rutgers University)

  • Stanislav Radchenko

    (University of North Carolina at Charlotte)

Abstract

The paper analyzes two questions: (i) the effect of a monetary policy shock on the business cycle and (ii) the extent to which a shift in a monetary policy affects the dynamics of business cycle. Unlike previous literature, to answer these questions, we measure cycle movements by calculating an index from a number of aggregate macroeconomic series via a dynamic factor model. We find that monetary policy shocks have a small but significant impact on persistent and transitory parts of the cycle. A systematic shift of monetary policy has a modest effect.

Suggested Citation

  • Oleg Korenok & Stanislav Radchenko, 2004. "Monetary Policy Effect on the Business Cycle Fluctuations: Output vs. Index Measures of the Cycle," Macroeconomics 0409015, EconWPA, revised 20 Sep 2004.
  • Handle: RePEc:wpa:wuwpma:0409015 Note: Type of Document - pdf; pages: 45
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    File URL: http://econwpa.repec.org/eps/mac/papers/0409/0409015.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    monetary policy; business cycle; dynamic factor model; index of coincident economic indicators.;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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