The paper proposes an empirical VAR for the UK open economy in order to measure the effects of monetary policy shocks from 1981 to 2003. The identification of the VAR structure is based on short-run restrictions that are consistent with the general implications of a New Keynesian model. The identification scheme used in the paper is successful in identifying monetary policy shocks and solving the puzzles and anomalies regarding the effects of monetary policy shocks. The estimated dynamic impulse responses and the forecast error variance decompositions show a consistency with the New Keynesian approach and other available theories. | DEPOCEN Working Paper Series No. 2007/06 Nominal Rigidities And The Real Effects Of Monetary Policy In A Structural VAR Model Pham The Anh * * School of Social Sciences, University of Manchester, UK Department of Economics, National Economics University, Vietnam The DEPOCEN WORKING PAPER SERIES disseminates research findings and promotes scholar exchanges in all branches of economic studies, with a special emphasis on Vietnam. The views and interpretations expressed in the paper are those of the author(s) and do not necessarily represent the views and policies of the DEPOCEN or its Management Board. The DEPOCEN does not guarantee the accuracy of findings, interpretations, and data associated with the paper, and accepts no responsibility whatsoever for any consequences of their use. The author(s) remains the copyright owner. DEPOCEN WORKING PAPERS are available online at NOMINAL RIGIDITIES AND THE REAL EFFECTS OF MONETARY POLICY IN A STRUCTURAL VAR MODEL♣ School of Social Sciences, University of Manchester, UK Department of Economics, National Economics University, Vietnam June, 2007 Abstract The paper proposes an empirical VAR for the UK open economy in order to measure the effects of monetary policy shocks from 1981 to 2003. The identification of the VAR structure is based on short-run restrictions that are consistent with the general implications of a New Keynesian model. The identification scheme used in the paper is successful in identifying monetary policy shocks and solving the puzzles and anomalies regarding the effects of monetary policy shocks. The estimated dynamic impulse responses and the forecast error variance decompositions show a consistency with the New Keynesian approach and other available theories. JEL codes: C30; E30; E32; E52. Keywords: Structural VAR; Nominal Rigidities; Monetary Policy Shocks; New Keynesian Theory ♣ This paper is a substantially revised chapter in my PhD dissertation at the University of .
