The monetary transmission mechanism describes the channels through which changes in monetary policy affect the policy target, price inflation. Understanding the transmission mechanism is thus central to the successful conduct of monetary policy. This paper uses a Vector AutoRegressive (VAR)...

With annual data, real M2 is shown to have a surprisingly strong contemporaneous and leading relationship to GDP, robust to the inclusion of other explanatory variables. When combined and tested with parsimonious error correction equations for money demand, price determination, and a monetary...

Empirical estimates of the Federal Reserve's policy rule typically find that the regression coefficient on the lagged federal funds rate is around 0.8 and strongly significant. One economic interpretation of this result is that the Fed intentionally "smoothes" interest rates, i.e., policymakers...