Monetary policy shocks, Choleski identification, and DNK models: An empirical investigation

Speaker:  Efrem Castelnuovo - Università di Padova
  Monday, May 17, 2010 at 12:30 PM Biblioteca DSE - Palazzina 32, ex Caserma Passalacqua

The standard Dynamic New-Keynesian (DNK) model predicts an /immediate/ response of inflation and the business cycle to a monetary policy shock. In contrast, the identification strategy typically employed in structural VARs assumes /delayed/ responses. Calstrom, Fuerst, and Paustian (2009, /Journal of Monetary Economics/) show that, /theoretically/, the Cholesky identification scheme can severely distort the VAR impulse response functions, producing price puzzles and muted responses of inflation and the output gap to monetary shocks. We assess the empirical relevance of CFP's conjecture with an estimated DNK of the U.S. economy.

Title Format  (Language, Size, Publication date)
Paper  pdfpdf (it, 296 KB, 13/05/10)

Programme Director
Angelo Zago

Publication date
February 9, 2010