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Time-Frequency Response Analysis of Monetary Policy Transmission

Lubos Hanus and Lukas Vacha ()

No 2018/30, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: In our study, we consider a new approach to quantify the effects of economic shocks on monetary transmission. We analyse the widely known phenomenon of price puzzle in a time-varying environment using the frequency decomposition. We use the frequency response function to measure the power of shocks transferred to different economic cycles. Considering both time and frequency domains, we quantify the dynamics of shocks implied by monetary policy within an economic system. While studying the monetary policy transmission of the U.S., the empirical evidence shows that low-frequency cycles of output are prevalent and have positive transfers. Examination of the inflation reveals that the frequency responses vary significantly in time and alter the direction of transmission for all cyclical lengths.

Keywords: cyclicality; frequency; economic systems; monetary policy (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018-10, Revised 2018-10
New Economics Papers: this item is included in nep-cba, nep-ets, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2018_30

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