Are the Effects of Monetary Policy Shocks Big or Small?

Olivier Coibion

No 17034, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the small estimated effects of monetary policy shocks from standard VAR's versus the large effects from the Romer and Romer (2004) approach. The differences are driven by three factors: the different contractionary impetus, the period of reserves targeting and lag length selection. Accounting for these factors, the real effects of policy shocks are consistent across approaches and most likely medium. Alternative monetary policy shock measures from estimated Taylor rules also yield medium-sized real effects and indicate that the historical contribution of monetary policy shocks to real fluctuations has been significant, particularly during the 1970s and early 1980s.

JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: EFG ME
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Citations: View citations in EconPapers (10)

Published as Olivier Coibion, 2012. "Are the Effects of Monetary Policy Shocks Big or Small?," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 1-32, April.

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Journal Article: Are the Effects of Monetary Policy Shocks Big or Small? (2012)
Working Paper: Are the effects of monetary policy shocks big or small? (2011)
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