Full Title: Systematic Monetary Policy and the Effect of Oil Price
Author(s): Ben S. Bernanke, Mark Gertler, and Mark Watson
Publisher(s): New York University
Publication Date: May 1, 1997
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Description (excerpt):
Macroeconomic shocks such as oil price increase induce a systematic (endogenous) response of monetary policy. We develop a VAR-based techniques for decomposing the total economic effects of a given exogenous shock into the portion attributable directly to the shock and part arising from the policy response to the shock. Although the standard errors are large, in our application, we find that a substantial part of the recessionary impact of an oil price shock results from the endogenous tightening of monetary policy rather than from the increase in oil prices per se.