Monetary policy effects on output and exchange rates: Results from US, UK and Japan

Mustafa Caglayan (), Kostas Mouratidis and Elham Saeidinezhad

No 2011016, Working Papers from The University of Sheffield, Department of Economics

Abstract: We investigate the effects of "contractionary" monetary shocks by imposing sign restrictions on the impulse responses of macroeconomic variables up to six months while allowing industrial production and exchange rate to be completely determined by the data. We show that i) the effect of an adverse monetary policy shock on industrial production is ambiguous; ii) there is price puzzle for Japan and UK which we conjecture as an outcome of excessive bank lending and poor regulation but not of passive monetary policy; ii) there is delayed overshooting puzzle for Japan and the exchange rate puzzle for the UK and the US.

Keywords: monetary shocks; business cycles; exchange rate puzzle; price puzzle; vector autoregression (search for similar items in EconPapers)
JEL-codes: C3 E1 E3 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-06
New Economics Papers: this item is included in nep-cba, 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:shf:wpaper:2011016

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