New VAR evidence on monetary transmission channels: temporary interest rate versus inflation target shocks

Elizaveta Lukmanova () and Katrin Rabitsch

No 274, Department of Economics Working Paper Series from WU Vienna University of Economics and Business

Abstract: We augment a standard monetary VAR on output growth, inflation and the nominal interest rate with the central bank's inflation target, which we estimate from a New Keynesian DSGE model. Inflation target shocks give rise to a simultaneous increase in inflation and the nominal interest rate in the short run, at no output expense, which stands at the center of an active current debate on the Neo-Fisher effect. In addition, accounting for persistent monetary policy changes reflected in inflation target changes improves identification of a standard temporary nominal interest rate shock in that it strongly alleviates the price puzzle.

Keywords: Monetary policy; Neo-Fisher effect; Time-varying inflation target; DSGE; VAR (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: New VAR evidence on monetary transmission channels: temporary interest rate versus inflation target shocks (2018)
Working Paper: New VAR evidence on monetary transmission channels: temporary interest rate versus inflation target shocks (2018)
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