Monetary Policy Matters : New Evidence Basedon a New Shock Measure

Author/Editor:

Christopher W. Crowe ; S. Mahdi Barakchian

Publication Date:

October 1, 2010

Electronic Access:

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Summary:

Conventional VAR and non-VAR methods of identifying the effects of monetary policy shocks on the economy have found a negative output response to monetary tightening using U.S. data over the 1960s-1990s. However, we show that these methods fail to find this contractionary effect when the sample is restricted to the period since the 1980s, apparently due to changes in the policymaking environment that reduce their effectiveness. Identifying policy shocks using Fed Funds futures data, we recover the contractionary effect of monetary tightening on output and find that almost half of output variation over the period appears due to policy shocks.

Series:

Working Paper No. 10/230

Subject:

English

Publication Date:

October 1, 2010

ISBN/ISSN:

9781455208951/1018-5941

Stock No:

WPIEA2010230

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

65

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