Misspecification, Identification or Measurement? Another Look at the Price Puzzle

Shuyun May Li, Roshan Perera () and Kalvinder Shields

No 1169, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper re-examines the VAR analysis of the price puzzle with regard to the issues of measurement, identification and misspecification. In an empirical analysis conducted for the US economy, we consider alternative measures of economic activity and inflation, alternative assumptions to identify the monetary policy shock and various VAR specifications making use of contemporaneous and forward looking variables. All three issues are found to be important for the resolution of the price puzzle and a robust preferred specification is proposed.

Keywords: Price puzzle; Monetary policy; Output gap; Expectations (search for similar items in EconPapers)
JEL-codes: C32 E31 E52 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2013
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:1169

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