A structural factor model for 112 US monthly macroeconomic series is used tostudy the effects of monetary policy. Monetary policy shocks are identified usinga standard recursive scheme, in which the impact effects on both industrial productionand prices are zero. The main findings are the following. (i) The maximaleffect on bilateral real exchange rates is observed on impact, so that the “delayedovershooting” puzzle disappears. (ii) After a contractionary shock prices fall at allhorizons, so that the price puzzle is not there. (iii) Monetary policy has a sizableeffect on both real and nominal variables.
The Dynamic Effects of Monetary Policy: A Structural Factor Model Approach / Forni, Mario; Gambetti, L.. - In: JOURNAL OF MONETARY ECONOMICS. - ISSN 0304-3932. - STAMPA. - 57:(2010), pp. 203-216. [10.1016/j.jmoneco.2009.11.009]
The Dynamic Effects of Monetary Policy: A Structural Factor Model Approach
FORNI, Mario;
2010
Abstract
A structural factor model for 112 US monthly macroeconomic series is used tostudy the effects of monetary policy. Monetary policy shocks are identified usinga standard recursive scheme, in which the impact effects on both industrial productionand prices are zero. The main findings are the following. (i) The maximaleffect on bilateral real exchange rates is observed on impact, so that the “delayedovershooting” puzzle disappears. (ii) After a contractionary shock prices fall at allhorizons, so that the price puzzle is not there. (iii) Monetary policy has a sizableeffect on both real and nominal variables.
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