Does Monetary Policy Matter? Narrative Versus Structural Approaches

Abstract

This paper compares results from the narrative approach of Romer and Romer (1989) to those from the structural approach regarding the effects of monetary policy on real output. The results from both approaches lead to the conclusions that monetary policy matters and that the effects build slowly following a monetary policy shock. The narrative approach, however, leads to larger and more persistent effects than does the structural approach. Reasons are advanced in the paper as to why this might be so.