THE PRICE PUZZLE AND VAR IDENTIFICATION
2014 ◽
Vol 19
(8)
◽
pp. 1880-1887
◽
Keyword(s):
In structural VARs, unexpected monetary tightening often leads to the price puzzle, a counterintuitive increase in inflation in the impulse response function. The identification of impulse responses requires at least a minimal set of structural assumptions, and models exhibiting the price puzzle typically use standard assumptions focusing mainly on relationships among contemporaneous disturbances. This note uses a well-established stylized fact, the long lags of monetary policy, to motivate a simple additional identifying assumption. The assumption eliminates a single term in one equation of the reduced form, and with it the price puzzle.
2021 ◽
Vol 1751
◽
pp. 012016
2010 ◽
Vol 09
(04)
◽
pp. 387-394
◽
2013 ◽
Vol E96.B
(5)
◽
pp. 1187-1193
◽
Keyword(s):
2003 ◽
Vol 285
(4)
◽
pp. G671-G680
◽