Measuring monetary policy shocks in France, Germany and Italy: The role of the exchange rate

Frank Smets

No 42, BIS Working Papers from Bank for International Settlements

Abstract: In the identified VAR literature the role of the exchange rate in measuring monetary policy shocks has often been neglected. However, many open economies find it useful to target the exchange rate. In such a regime exchange rate innovations will better capture domestic monetary policy shocks. This paper first estimates the weight on the ECU exchange rate in France, Germany and Italy under the ERM regime. Next, these weights are used to identify a typical monetary policy shock in these countries and analyse its effects on output, inflation, the interest rate and the exchange rate.

Pages: 25 pages
Date: 1997-06
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Citations: View citations in EconPapers (46)

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Related works:
Journal Article: Measuring Monetary Policy Shocks in France, Germany and Italy: The Role of The Exchange Rate (1997)
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