Working Paper: NBER ID: w6400
Authors: Lawrence J. Christiano; Martin Eichenbaum; Charles L. Evans
Abstract: This paper reviews recent research that grapples with the question: What happens after an exogenous shock to monetary policy? We argue that this question is interesting because it lies at the center of a particular approach to assessing the empirical plausibility of structural economic models that can be used to think about systematic changes in monetary policy institutions and rules. The literature has not yet converged on a particular set of assumptions for identifying the effects of an exogenous shock to monetary policy. Nevertheless, there is considerable agreement about the qualitative effects of a monetary policy shock in the sense that inference is robust across a large subset of the identification schemes that have been considered in the literature. We document the nature of this agreement as it pertains to key economic aggregates.
Keywords: No keywords provided
JEL Codes: E3; E4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exogenous monetary policy shocks (E19) | changes in economic aggregates (E10) |
| exogenous monetary policy shocks (E19) | changes in output (E23) |
| exogenous monetary policy shocks (E19) | changes in employment (J63) |
| exogenous monetary policy shocks (E19) | changes in inflation (E31) |