Identifying the Effects of Monetary Policy Shocks in an Open Economy

Arbeitspapier

This paper presents estimates of the effects of monetary policy shocks on the Swedish economy. A theoretical model of an open economy is used to identify a structural VAR model. The empirical results from the identified VAR model are compared with two less structural approaches for identification of monetary policy shocks. The first assumes that shocks can be measured as deviations from a forward looking interest rate rule, estimated using Sveriges Riksbank's (Swedish central bank) own forecasts. The second approach focuses on the effects of narrative monetary policy shocks as given by devaluations of the Swedish currency. We find that plausible theoretical restrictions often result in price puzzles. Although conventional results obtain with certain theoretical restrictions imposed on the VAR, another way to achieve this is by using external information about large policy shocks. Thus, we find that the effects of some devaluations are consistent with the conventional wisdom about the effects of monetary policy shock.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 134

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Price Level; Inflation; Deflation ; Monetary Policy
• Subject: Common trends ; devaluations ; identification ; inflation ; monetary policy shocks ; open economy ; structural vector autoregression

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jacobson, Tor ; Jansson, Per ; Vredin, Anders ; Warne, Anders
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/82387
• Last update: 10.03.2025, 11:42 AM CET