The Narrative Approach for the Identification of Monetary Policy Shocks in a Small Open Economy

Eleni Angelopoulou ()

No 55, Working Papers from Bank of Greece

Abstract: This paper reviews 22 years of UK monetary policy in the pre-inflation targeting period (1971-1992) using official record from the Bank of England Quarterly Bulletin. A transparent definition of policy episodes is used. The empirical analysis shows that output displays the usual hump-shaped response after a shock to the policy indicator. All variables display theory-consistent behaviour. Monetary policy and exchange rate volatility are found to cause substantial output fluctuation in a four year horizon. The “narrative model” extended to a small open economy compares well with a structural VAR.

Keywords: Monetary Policy Shocks; Narrative Approach; UK. (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2007-02
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Persistent link: http://EconPapers.repec.org/RePEc:bog:wpaper:55

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