Mark Gertler and Peter Karadi identify U.S. monetary policy shocks using both vector autoregression (VAR) and high-frequency identification (HFI) methods. They find that monetary policy surprises lead to modest movements in short-term interest rates, which in turn result in large movements in credit costs and economic activity. The large movements in credit costs are mainly due to the reaction of both term premia and credit spreads, channels that are typically absent from the standard model of monetary policy transmission. Link to paper in first comment.
Posted on: Mon, 07 Jul 2014 13:50:34 +0000
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