Do monetary policy shocks matter in the G-7 countries? Using common identifying assumptions about monetary policy across countries

This paper suggests an identified VAR model that identifies monetary policy actions for the G-7 countries without encountering empirical puzzles such as the price puzzle and the liquidity puzzle. Using the model, the effects of monetary policy shocks are examined for the postwar period. Monetary policy shocks have significant effects on output in the short run. However, the contribution of monetary policy shocks to output fluctuations is relatively small - monetary policy shocks are not the major sources of postwar G-7 output fluctuations, (C) 1999 Elsevier Science B.V. All rights reserved.