Monetary Policy Effect on the Business Cycle Fluctuations: Output vs. Index Measures of the Cycle
نویسندگان
چکیده
The paper analyzes two questions: (i) the effect of monetary policy shock on business cycle and (ii) the extent to which a shift in a monetary policy affects the dynamics of business cycle. Unlike previous literature, to answer the questions, we measure the cycle movements by calculating an index from a number of aggregate macroeconomic series via a dynamic factor model. We find that monetary policy shocks have a significant impact on a persistent part and a smaller effect on transitory part of the cycle. A systematic shift of monetary policy has a modest effect.
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