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Identifying US Monetary Policy Shocks Through Sign Restrictions in Dollarized Countries

Tinbergen Institute Discussion Paper No. 2011-145/2

23 Pages Posted: 6 Dec 2011  

Alessandro Gobbi

affiliation not provided to SSRN

Tim Willems

University of Oxford - Nuffield College

Date Written: September 28, 2011

Abstract

Since dollarized countries import US monetary policy, identifying US monetary shocks through sign restrictions on US variables only, does not use all available information. In this paper, we therefore include dollarized countries, which enable us to restrict more variables and leave the responses of US output and prices unrestricted (to allow for the working capital view of monetary shocks). We find only little evidence for the latter in the US, as prices fall immediately after most contractionary shocks that we identify. Furthermore, monetary shocks do not seem to have a clear effect on real GDP.

Keywords: Monetary policy effects, price puzzle, structural VARs, identification

JEL Classification: E52, E31, C32

Suggested Citation

Gobbi, Alessandro and Willems, Tim, Identifying US Monetary Policy Shocks Through Sign Restrictions in Dollarized Countries (September 28, 2011). Tinbergen Institute Discussion Paper No. 2011-145/2. Available at SSRN: https://ssrn.com/abstract=1968445 or http://dx.doi.org/10.2139/ssrn.1968445

Alessandro Gobbi

affiliation not provided to SSRN ( email )

Tim Willems (Contact Author)

University of Oxford - Nuffield College ( email )

New Road
Oxford, OX1 1NF
United Kingdom

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