Transmission Lags of Monetary Policy: A Meta-Analysis

32 Pages Posted: 12 Dec 2012 Last revised: 20 Jan 2013

See all articles by Tomas Havranek

Tomas Havranek

Charles University in Prague; Centre for Economic Policy Research (CEPR)

Marek Rusnák

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: October 12, 2012

Abstract

The transmission of monetary policy to the economy is generally thought to have long and variable lags. In this paper we quantitatively review the modern literature on monetary transmission in transition and developed countries to provide stylized facts on the average lag length and the sources of variability. We collect 67 published studies and examine when prices bottom out after a monetary contraction. The average transmission lag is 29 months, and the maximum decrease in prices reaches 0.9% on average after a one-percentage point hike in the policy rate. Transmission lags are longer in developed economies (25{50months) than in transition economies (10{20 months). We find that the factor most effective in explaining this heterogeneity is nancial development: greater financial development is associated with slower transmission. Our results also suggest that researchers who use monthly data instead of quarterly data report systematically faster transmission.

Keywords: monetary policy transmission, vector autoregressions, metaanalysis

JEL Classification: C83, E52

Suggested Citation

Havranek, Tomas and Rusnák, Marek, Transmission Lags of Monetary Policy: A Meta-Analysis (October 12, 2012). William Davidson Institute Working Paper No. 1038, Available at SSRN: https://ssrn.com/abstract=2188438 or http://dx.doi.org/10.2139/ssrn.2188438

Tomas Havranek (Contact Author)

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Marek Rusnák

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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