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Vintage article: the effect of monetary policy shocks in the United Kingdom: an external instruments approach

Abstract:

This paper uses VAR analysis to identify monetary policy shocks on U.K. data using surprise changes in the policy rate as external instruments and imposing block exogeneity restrictions on domestic variables to estimate parameters from the viewpoint of the domestic economy. The results show large and persistent effects of monetary policy shocks on the domestic economy and point to the critical role of exchange rates and term premia. The analysis resolves important empirical puzzles of traditi...

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Publication status:
Published

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Publisher:
University of Oxford
Series:
Department of Economics Discussion Paper Series
Publication date:
2020-09-27
Paper number:
812
Keywords:
Pubs id:
1143470
Local pid:
pubs:1143470
Deposit date:
2020-12-14

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