How to Solve the Price Puzzle? A Meta‐Analysis

Marek Rusnák, Tomas Havranek and Roman Horvath

Journal of Money, Credit and Banking, 2013, vol. 45, issue 1, 37-70

Abstract: The short‐run increase in prices following an unexpected tightening of monetary policy constitutes a puzzle frequently reported in empirical studies. Yet the puzzle is easy to explain away when all published models are quantitatively reviewed. We collect and examine about 1,000 point estimates of impulse responses from 70 articles that use vector autoregressions to study monetary transmission in various countries. We find that the puzzle is created by model misspecifications: especially by the omission of commodity prices, neglect of potential output, and reliance on recursive identification. Our results also suggest that the strength of monetary policy depends on the country’s openness, phase of the economic cycle, and degree of central bank independence.

Date: 2013
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https://doi.org/10.1111/j.1538-4616.2012.00561.x

Related works:
Journal Article: How to Solve the Price Puzzle? A Meta-Analysis (2013)
Working Paper: How to Solve the Price Puzzle? A Meta-Analysis (2011)
Working Paper: How to Solve the Price Puzzle? A Meta-Analysis (2011)
Working Paper: How to Solve the Price Puzzle? A Meta-Analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:45:y:2013:i:1:p:37-70

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