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- Title
Real and nominal effects of monetary policy shocks.
- Authors
Bhuiyan, Rokon; Lucas, Robert F.
- Abstract
We employ the identification scheme of Kahn, Kandel and Sarig (2002) to analyse the impact of Canadian monetary policy on ex ante real interest rates and inflationary expectations. First, we decompose nominal interest rates into ex ante real rates and inflationary expectations using the methodology of Blanchard and Quah (1989) . Then we estimate a recursive VAR model with innovations in a monetary aggregate and the overnight target interest rate as alternative measures of monetary policy shocks. We find that a negative policy shock raises both nominal and ex ante real interest rates, lowers inflationary expectations and real industrial output, and appreciates the Canadian dollar.
- Subjects
CANADA; MONETARY policy; INTEREST rates; PRICE inflation; NOMINAL measurement; ECONOMIC value added (Corporations); INVESTMENT interest; INDUSTRIAL productivity; CANADIAN dollar
- Publication
Canadian Journal of Economics, 2007, Vol 40, Issue 2, p679
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/j.1365-2966.2007.00426.x