Monetary policy transmission in an open economy: new data and evidence from the United Kingdom

Ambrogio Cesa-Bianchi, Gregory Thwaites and Alejandro Vicondoa

No 615, Bank of England working papers from Bank of England

Abstract: This paper constructs a new series of monetary policy surprises for the United Kingdom and estimates their effects on macroeconomic and financial variables, employing a high-frequency identification procedure. First, using local projections methods, we find that monetary policy has persistent effects on real interest rates and breakeven inflation. Second, employing our series of surprises as an instrument in a SVAR, we show that monetary policy affects economic activity, prices, the exchange rate, exports and imports. Finally, we implement a test of overidentifying restrictions, which exploits the availability of the narrative series of monetary policy shocks computed by Cloyne and Huertgen (2014), and find no evidence that either set of shocks contains any endogenous response to macroeconomic variables.

Keywords: Monetary policy transmission; external instrument; high-frequency identification; structural VAR; local projections (search for similar items in EconPapers)
JEL-codes: E31 E32 E43 E44 E52 E58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2016-09-02
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fdg, nep-mac, nep-mon, nep-opm and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Related works:
Working Paper: Monetary Policy Transmission in an Open Economy: New Data and Evidence from the United Kingdom (2016)
Working Paper: Monetary policy transmission in an open economy:new data and evidence from the United Kingdom (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0615

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