Fabio C. Bagliano
Dipartimento di Scienze Economiche e Finanziarie, Università di Torino

Carlo A. Favero
IGIER - Università Commerciale "Luigi Bocconi" (Milano) and CEPR (London)

                                European Economic Review, vol. 43, 5, 1999, p.825-837

Exogenous measures of monetary policy shocks, directly derived from financial market information, are used in close (US) and open (US-Germany) economy VAR models to evaluate the robustness of the dynamic effect of monetary policy obtained from traditional identified VAR. The empirical analysis confirms the main features of the monetary policy transmission mechanism in US and Germany, explicitly addressing the issue of simultaneity between the German policy interest rate and the US dollar-DMark exchange rate.

J.E.L. classification numbers: E44, E52, F41
Keywords: monetary policy, VAR models, exchange rates, implicit forward rate curve              Download WP PDF  (390 kb)