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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Monetary Disturbances Matter for Business Fluctuations in the G-7
Fabio Canova; Gianni De Nicoló
2000-660  (February 2000)

Abstract:  This paper examines the importance of monetary disturbances for cyclical fluctuations in real activity and inflation. It employs a novel identification approach which uses the sign of the cross-correlation function in response to shocks to assign a structural interpretation to orthogonal innovations. We find that monetary shocks significantly drive output and inflation cycles in all G-7 countries; that they are the dominant source of fluctuations in three of the seven countries; that they contain an important policy component, and that their impact is time varying.

Full paper (498 KB PDF)

Keywords
Structural Shocks, Business Cycles, Monetary Disturbances, Dynamic Correlations

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Last update: July 19, 2001