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dc.contributor.authorBjørnland, Hilde C.
dc.date.accessioned2018-05-08T12:58:40Z
dc.date.available2018-05-08T12:58:40Z
dc.date.issued2009
dc.identifier.isbn978-82-7553-504-5
dc.identifier.issn1502-8143
dc.identifier.urihttp://hdl.handle.net/11250/2497635
dc.description.abstractDornbusch’s exchange rate overshooting hypothesis is a central building block in international macroeconomics. Yet, empirical studies of monetary policy have typically found exchange rate effects that are inconsistent with overshooting. This puzzling result has been viewed by some researchers as a “stylized fact” to be reckoned with in policy modelling. However, many of these studies, in particular those using VARs, have disregarded the strong contemporaneous interaction between monetary policy and exchange rate movements by placing zero restrictions on them. In contrast, we achieve identification by imposing a long-run neutrality restriction on the real exchange rate, thereby allowing for contemporaneous interaction between the interest rate and the exchange rate. In a study of four open economies, we find that the puzzles disappear. In particular, a contractionary monetary policy shock has a strong effect on the exchange rate, which appreciates on impact. The maximum effect occurs within 1-2 quarters, and the exchange rate thereafter gradually depreciates to baseline, consistent with the Dornbusch overshooting hypothesis and with few exceptions consistent with UIP.nb_NO
dc.language.isoengnb_NO
dc.publisherNorges Banknb_NO
dc.relation.ispartofseriesWorking Papers;9/2009
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 Internasjonal*
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/deed.no*
dc.subjectJEL: C32nb_NO
dc.subjectJEL: E52nb_NO
dc.subjectJEL: F31nb_NO
dc.subjectJEL: F41nb_NO
dc.subjectUIPnb_NO
dc.subjectuncovered interest paritynb_NO
dc.subjectstructural VARnb_NO
dc.subjectDornbusch overshootingnb_NO
dc.subjectexchange ratenb_NO
dc.subjectmonetary policynb_NO
dc.titleMonetary Policy and Exchange Rate Overshooting: Dornbusch Was Right After Allnb_NO
dc.typeWorking papernb_NO
dc.description.versionpublishedVersionnb_NO
dc.subject.nsiVDP::Samfunnsvitenskap: 200::Økonomi: 210::Samfunnsøkonomi: 212nb_NO
dc.source.pagenumber30nb_NO


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Attribution-NonCommercial-NoDerivatives 4.0 Internasjonal
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