We explore the use of external instrument SVAR to identify monetary policy shocks. We identify a forward guidance shock as the monetary shock component having zero instant impact on the policy rate. A contractionary forward guidance shock raises both future output and price level, stressing the relative importance of revealing policymakers’ view on future output and price level over committing ...

a r t i c l e i n f o JEL classification: C22 E44 F31 Keywords: Monetary shocks Asymmetric effects MSVAR–EGARCH In this paper, we study the effect of monetary shocks on the Chinese stock market over the period of 2005 to 2011 with the MSVAR–EGARCH model. The evidence suggests that Chinese monetary policies have significantly asymmetric effects on the stock market in different time periods and m...

Michael Woodford’s paper “Inflation Targeting and Financial Stability” presents a case for tighter monetary policy, “leaning against the wind,” in order to reduce the probability of a financial crisis. However, the introduction of financial-stability instruments (macroprudential instruments) that have a more direct effect on leverage than the policy rate allows monetary-policy and financial-sta...

This paper is concerned with the saddle-path stability of monetary growth rules in a two-country two-sector dynamic stochastic general equilibrium model. Alongside standard features of emerging economies, such as a combination of producer and local currency pricing for exports, fiscal dominance and oil exports, this model also incorporates informal labour and production sectors and examines how...

This paper provides a non-technical introduction to monetary policy—what it is, how it works, and why it matters. It discusses inflation volatility and why this is damaging to the economy, as well as why increased stability of output growth is desirable. In both cases, changes in Canadian economic performance over the past few decades are examined. The paper also provides a detailed discussion ...

Seasonal fluctuations are as large as cyclical fluctuations. Monetary policy in the U.S. has dealt with seasonality by smoothing nominal rates of interest. The original motivation for this was that seasonality in nominal interest rates put recurring strain on the banking system. We build a model of monetary policy in the presence of seasonality which puts financial market conditions in the fore...

We examine whether the publication of forecasts concerning the likely future conduct of monetary policy is socially desirable. Introducing a new central bank loss function that accounts for the deviations from announcements, we incorporate forecasts about future inflation and interest rates into a dynamic monetary model. We show that the announcement of future interest rates is always socially ...

When you look back over the past half-century in the United States you see a remarkable secular change in the housing cycle. Most importantly, the volatility or average size of the fluctuations in residential construction declined. The change occurred in the early 1980s. For example, compare two periods, the first before the early 1980s and the second since the 1980s. In the earlier period the ...