Article2006

DOES MONETARY POLICY GENERATE RECESSIONS?

562 citations0/0 files storedMacroeconomic Dynamics

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Monetary Policy and Economic Impact Global Financial Crisis and Policies Economic theories and models

Abstract

We consider two kinds of answers to the title question: Do random shifts in monetary policy account for historical recessions, and would changes in the systematic component of monetary policy have allowed reductions in inflation or output variance without substantial costs. The answer to both questions is no. We use weak identifying assumptions and include extensive discussion of these assumptions, including a completely specified dynamic stochastic equilibrium model in which our identifying assumptions can be shown to be approximately satisfied.

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References

1989The federal funds rate and the channels of monetary transmission 1998Monetary Policy Shocks: What Have We Learned and to What End?1995Exchange Rate Dynamics Redux 1992Interpreting the macroeconomic time series facts 1998Measuring Monetary Policy 1997Systematic Monetary Policy and the Effects of Oil Price Shocks 1999Chapter 2 Monetary policy shocks: What have we learned and to what end?1986Are Forecasting Models Usable for Policy Analysis?

Cited by

2002An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output 2007Exploring the international linkages of the euro area: a global VAR analysis 2004Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: A Comment 1998The robustness of identified VAR conclusions about money 1999A No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables 2011News shocks and business cycles

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