Which Monetary Shocks Matter in Small Open Economies? Evidence from SVARs

Jongrim Ha and Inhwan So

No 2017-2, Working Papers from Economic Research Institute, Bank of Korea

Abstract: This paper investigates the nature of monetary policy transmission in the U.S. and selected small open economies by estimating SVAR models using the external instrument identification method. Differing from related studies on the U.S., which employ high-frequency futures data on Federal Funds rates, we exploit alternative sets of external instruments for the focal economies. We find that U.S. monetary policy plays an important role in monetary transmission in SOE interest rates, presumably hampering the effectiveness of domestic monetary policy. We also provide some evidence that foreign exchange rates in this process respond to monetary shocks as Dornbusch (1976)'s overshooting hypothesis.

Keywords: Monetary policy transmission; External instrument identification; Structural VAR model (search for similar items in EconPapers)
JEL-codes: E44 E52 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2017-01-19
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 (3)

Downloads: (external link)
http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2017-2.pdf Working Paper, 2017 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:1702

Access Statistics for this paper

More papers in Working Papers from Economic Research Institute, Bank of Korea Contact information at EDIRC.
Bibliographic data for series maintained by Economic Research Institute ().