policy analysis. It suggests that the best method of solving the puzzle implies a close connection between theory and … misspecified VAR are optimal. When the model is tested on US data, all predictions are supported. -- Price puzzle ; monetary policy … ; misspecification ; output gap ; potential output ; technology shocks; VAR …

a measure of output gap from the VAR estimated by Bernanke and Mihov lies at the heart of this ''excessive'' persistence … proxy for the output gap in the VAR is then shown to drastically increase the evidence for long-run money neutrality on US … data, as predicted by the theoretical analysis. -- long-run money neutrality ; technology shocks ; output gap ; VAR …

literature. An advantage here is that the asymptotic distribution theory is standard. The performance of the tests is compared to …