Monetary Disturbances Matter for Business Fluctuations in the G-7

By Fabio Canova, Gianni De Nicolò. 2002

818 citations recorded by the source corpus.

This paper examines the importance of monetary disturbances for cyclical fluctuations in real activity and inflation. It employs a novel identification approach which uses the sign of the cross-correlation function in response to shocks to assign a structural interpretation to orthogonal innovations. We find that monetary shocks significantly drive output and inflation cycles in all G-7 countries; that they are the dominant source of fluctuations in three of the seven countries; that they contain an important policy component, and that their impact is time varying.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b34aa9c5e817a96183e2829f987e0f27f9dde27b

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Citations in the corpus

A Theory of Demand Shocks (2009, background): “18 The demand faced by rm j in island l, (20), can be rewritten, in log-linear approximation, as yj;l;t = Z ~l2L̂l;t c~l;t + p~l;t d~l pj;l;t:”
Real Effects of Quantitative Easing at the Zero-Lower Bound: Structural VAR-Based Evidence from Japan (2011, methodology): “As in Uhlig (2005), Canova and Nicolo (2002) and Peersman (2005) identification of the structural shocks is achieved by imposing sign restrictions on the impulse response functions.”
Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks (2012, positive): “Alternatively, restrictions may be imposed directly on the impulse response functions as suggested by Canova and de Nicoló ( 2002 ) and Uhlig ( 2004 ). the outcome.”
What Caused the Early Millennium Slowdown? Evidence Based on Vector Autoregressions (2005, methodology): “The second identification strategy is based on more recent sign restrictions, pioneered by Faust (1998), Uhlig (1999) and Canova and De Nicoló (2002).”
Oil and the Macroeconomy: A Quantitative Structural Analysis (2012, positive): “The identification method is based on sign restrictions, following the approach pioneered by Davis and Haltiwanger (1999), Canova and Nicolo (2002) and Uhlig (2005). The idea is to use some robust properties of the model, namely the sign of impulse responses discussed in the previous section, withou”