This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Journal: Macroeconomics
  4. October 2016
  5. The Macroeconomic Effects of Monetary Policy: A New Measure for the United Kingdom

The Macroeconomic Effects of Monetary Policy: A New Measure for the United Kingdom

Download Full Text PDF

Abstract

This paper estimates the effects of monetary policy based on a new, extensive real-time dataset for the United Kingdom. Employing the Romer-Romer identification approach we construct a new measure of monetary policy innovations and find that a 1 percentage point increase in the policy rate reduces output by 0.6 percent and inflation by up to 1 percentage point after 2 to 3 years. Our use of forecast data is shown to be crucial and that their omission generates the well-known price puzzle. Our estimates are more comparable to the wider VAR literature but we also reconcile our findings with the Romer-Romer estimates for the United States.

Citation

Cloyne, James, and Patrick Hürtgen. 2016. "The Macroeconomic Effects of Monetary Policy: A New Measure for the United Kingdom." American Economic Journal: Macroeconomics, 8 (4): 75-102. DOI: 10.1257/mac.20150093

Additional Materials

JEL Classification

  • E23 Macroeconomics: Production
  • E31 Price Level; Inflation; Deflation
  • E32 Business Fluctuations; Cycles
  • E52 Monetary Policy
There are no comments for this article.
Login to Comment