The Effects of Monetary Policy Shocks on Exchange Rates: A Structural Vector Error Correction Model Approach
نویسندگان
چکیده
This paper investigates the effects of shocks to U.S. monetary policy on the dollar/yen exchange rate, using structural Vector Error Correction Model (VECM) methods. We compare our estimates of the impulse responses with those based on levels Vector Autoregression. We also compare results from short run and long run restrictions imposed on the structural VECM. We find evidence of overshooting behavior of exchange rates with all methods. We find the price puzzle with levels Vector Autoregression and VECM with short-run restrictions. In contrast, we do not find the price puzzle with VECM with long-run restrictions.
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