The Macroeconomic Effects of Monetary Policy: A New Measure for the United Kingdom

James Cloyne and Patrick Hürtgen

American Economic Journal: Macroeconomics, 2016, vol. 8, issue 4, 75-102

Abstract: This paper estimates the effects of monetary policy based on a new, extensive real-time dataset for the United Kingdom. Employing the Romer-Romer identification approach we construct a new measure of monetary policy innovations and find that a 1 percentage point increase in the policy rate reduces output by 0.6 percent and inflation by up to 1 percentage point after 2 to 3 years. Our use of forecast data is shown to be crucial and that their omission generates the well-known price puzzle. Our estimates are more comparable to the wider VAR literature but we also reconcile our findings with the Romer-Romer estimates for the United States.

JEL-codes: E23 E31 E32 E52 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mac.20150093
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Citations: View citations in EconPapers (136)

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Related works:
Working Paper: The macroeconomic effects of monetary policy: a new measure for the United Kingdom (2014)
Working Paper: The macroeconomic effects of monetary policy: A new measure for the United Kingdom (2014)
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