We explore the use of external instrument SVAR to identify monetary policy shocks. We identify a forward guidance shock as the monetary shock component having zero instant impact on the policy rate. A contractionary forward guidance shock raises both future output and price level, stressing the...

We identify forward guidance shocks using external instrument structural vector autoregression (SVAR). Contractionary forward guidance shocks raise both future output and price level, and this suggests that monetary policy announcements affect the expected future rate path mainly by revealing...