To Sign or Not to Sign? On the Response of Prices to Financial and Uncertainty Shocks

23 Pages Posted: 17 Sep 2018 Last revised: 21 Feb 2019

See all articles by Philipp Meinen

Philipp Meinen

Deutsche Bundesbank

Oke Röhe

Deutsche Bundesbank

Date Written: 2018

Abstract

Based on SVAR models identified by sign restrictions, we estimate the macroeconomic effects of financial and uncertainty shocks in the euro area and the US, paying particular attention to their effects on prices. While our results confirm that such disturbances are important drivers of output fluctuations in both economies, we find the shock responses of consumer prices to be ambiguous. Moreover, restricting prices to co-moving with output can considerably attenuate the measured impact of financial and uncertainty shocks on real activity.

Keywords: Financial Shocks, Uncertainty Shocks, Sign Restrictions, Euro Area, United States

JEL Classification: C11, C32, E32, E44

Suggested Citation

Meinen, Philipp and Röhe, Oke, To Sign or Not to Sign? On the Response of Prices to Financial and Uncertainty Shocks (2018). Deutsche Bundesbank Discussion Paper No. 33/2018, Available at SSRN: https://ssrn.com/abstract=3249944

Philipp Meinen (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Oke Röhe

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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