MONETARY POLICY SHOCKS: WHAT

HAVE WE LEARNED AND TO WHAT END?

Lawrence J. Christiano
Martin Eichenbaum
Charles L. Evans

Working Paper 6400

 NBER WORKING PAPER SERIES

MONETARY POLICY SHOCKS: WHAT

HAVE WE LEARNED AND TO WHAT END?

Lawrence J. Christiano
Martin Eichenbaum
Charles L. Evans

Working Paper 6400

http://www.nber.org/papers/w6400

NATIONAL BUREAU OF ECONOMIC RESEARCH

1050 Massachusetts Avenue
Cambridge, MA 02138
February 1998

We thank Wendy Edelberg for superb research assistance. This work has been supported by a grant
from the National Science Foundation to the National Bureau of Economic Research. The views
expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of
Chicago, the Federal Reserve System or the National Bureau of Economic Research.

© 1998 by Lawrence J. Christiano, Martin Eichenbaum and Charles L. Evans. All rights reserved.
Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission
provided that full credit, including © notice, is given to the source.
Monetary Policy Shocks: What Have We Learned
and to What End?
Lawrence J. Christiano, Martin Eichenbaum
and Charles L. Evans
NBER Working Paper No. 6400
February 1998
JEL Nos. E3, E4

ABSTRACT

This paper reviews recent research that grapples with the question: What happens after an

exogenous shock to monetary policy? We argue that this question is interesting because it lies at the

center of a particular approach to assessing the empirical plausibility of structural economic models

that can be used to think about systematic changes in monetary policy institutions and rules.

The literature has not yet converged on a particular set of assumptions for identifying the

effects of an exogenous shock to monetary policy. Nevertheless, there is considerable agreement

about the qualitative effects of a monetary policy shock in the sense that inference is robust across

a large subset of the identification schemes that have been considered in the literature. We document

the nature of this agreement as it pertains to key economic aggregates.

Lawrence J. Christiano Martin Eichenbaum

Department of Economics Department of Economics
Northwestern University Northwestern University
Evanston, IL 60208 Evanston, IL 60208
and NBER and NBER
l-christiano@nwu.edu eich@nwu.edu

Charles L. Evans
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604
cevans@frbchi.org