What Does a Monetary Policy Shock Do? An International Analysis with Multiple Filters

26 Pages Posted: 17 Aug 2013

See all articles by Efrem Castelnuovo

Efrem Castelnuovo

University of Melbourne - Department of Economics

Date Written: October 2013

Abstract

What does a monetary policy shock do? We answer this question by estimating a new‐Keynesian monetary policy dynamic stochastic general equilibrium model for a number of economies with a variety of empirical proxies of the business cycle. The effects of two different policy shocks, an unexpected interest rate hike conditional on a constant inflation target and an unpredicted drift in the inflation target, are scrutinized. Filter‐specific Bayesian impulse responses are contrasted with those obtained by combining multiple business cycle indicators. Our results document the substantial uncertainty surrounding the estimated effects of these two policy shocks across a number of countries.

JEL Classification: C32, E32, E37

Suggested Citation

Castelnuovo, Efrem, What Does a Monetary Policy Shock Do? An International Analysis with Multiple Filters (October 2013). Oxford Bulletin of Economics and Statistics, Vol. 75, Issue 5, pp. 759-784, 2013. Available at SSRN: https://ssrn.com/abstract=2311565 or http://dx.doi.org/10.1111/j.1468-0084.2012.00712.x

Efrem Castelnuovo (Contact Author)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

HOME PAGE: http://https://sites.google.com/site/efremcastelnuovo/home

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