Monetary Policy Shocks and Narrative Restrictions: Rules Matter

Efrem Castelnuovo, Giovanni Pellegrino and Laust L. Særkjær

No 12246, CESifo Working Paper Series from CESifo

Abstract: Imposing restrictions on policy rule coefficients in vector autoregressive (VAR) models enhances the identification of monetary policy shocks obtained with sign and narrative restrictions. Monte Carlo simulations and empirical analyses for the United States and the Euro area support this result. For the U.S., adding policy coefficient restrictions yields a larger and more precise short-run output response and more stable Phillips multiplier estimates. Heterogeneity in output responses reflects variation in systematic policy reactions to output. In the Euro area, policy coefficient restrictions sharpen the identification of corporate bond spread responses to monetary policy shocks.

Keywords: monetary policy shocks; narrative restrictions; policy coefficient restrictions; vector autoregressive models; Monte Carlo simulations; DSGE models (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cba, nep-ets and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ifo.de/DocDL/cesifo1_wp12246.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12246

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().