Vector Autoregressions

Observations on Neutral Shock• Generally, results are ‘noisy’, as one expects.– Interest, money growth, velocity responses not pinneddown.• Interestingly, inflation response is immediate andprecisely estimated.• Does this raise a question about the conventionalinterpretation t ti of the response of inflation to a monetaryshock?• Alternative possibility: information confusion stories.– A variant of recent work by Rhys Mendes that builds onGuido Lorenzoni’s work.