A VAR Model for Monetary Policy Analysis in a Small Open Economy

Tor Jacobson (), Per Jansson (), Anders Vredin () and Anders Warne
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Tor Jacobson: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

No 77, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: The interest in empirical studies of monetary policy has increased in the last decade. The deregulation of financial markets and the increased use of explicit policy rules and targets have made monetary policy more transparent and interesting for economic analysis. This paper demonstrates how a VAR model with long run restrictions justified by economic theory can be usefully applied in analyses of issues central to monetary policy: the effects of innovations in interest rates and other shocks; the short and long run relationships between prices and nominal and real exchange rates; the properties of an index of monetary conditions; dynamic forecasts of inflation; and the relation between inflation and the output gap

Keywords: Cointegration; Common stochastic trends; Monetary policy; Vector autoregressions (search for similar items in EconPapers)
JEL-codes: C32 C52 C53 E31 E52 (search for similar items in EconPapers)
Pages: 54 pages
Date: 1999-02-01
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in Journal of Applied Econometrics, 2001, pages 487-520.

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