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The transmission of monetary policy shocks

Author

Listed:
  • Miranda-Agrippino, Silvia

    (Bank of England)

  • Ricco, Giovanni

    (University of Warwick)

Abstract
Despite years of research, there is still uncertainty around the effects of monetary policy shocks. We reassess the empirical evidence by combining a new identification that accounts for informational rigidities, with a flexible econometric method robust to misspecifications that bridges between VARs and Local Projections. We show that most of the lack of robustness of the results in the extant literature is due to compounding unrealistic assumptions of full information with the use of severely misspecified models. Using our novel methodology, we find that a monetary tightening is unequivocally contractionary, with no evidence of either price or output puzzles.

Suggested Citation

  • Miranda-Agrippino, Silvia & Ricco, Giovanni, 2017. "The transmission of monetary policy shocks," Bank of England working papers 657, Bank of England.
    • Handle: RePEc:boe:boeewp:0657
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    More about this item

    Keywords

    Monetary policy; local projections; VARs; expectations; information rigidity; survey forecasts; external instruments;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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