SVAR (Mis)identification and the Real Effects of Monetary Policy Shocks

Christian Wolf

American Economic Journal: Macroeconomics, 2020, vol. 12, issue 4, 1-32

Abstract: I argue that the seemingly disparate findings of the recent empirical literature on monetary policy transmission are all consistent with the same standard macro models. Weak sign restrictions, which suggest that contractionary monetary policy, if anything, boosts output, present as policy shocks what actually are expansionary demand and supply shocks. Classical zero restrictions are robust to such misidentification, but miss short-horizon effects. Two recent approaches—restrictions on Taylor rules and external instruments—instead work well. My findings suggest that empirical evidence is consistent with models in which the real effects of monetary policy are larger than commonly estimated.

JEL-codes: C32 E12 E32 E43 E52 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (49)

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DOI: 10.1257/mac.20180328

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