Arestis, P., Karoglou, M. and Mouratidis, K.
(2013)
The price puzzle: fact or artefact?
Working Paper.
Department of Economics, University of Sheffield
ISSN 1749-8368
Abstract
A conventional finding of recursive structural VAR (SVAR) analyses is the price puzzle namely the positive relationship between interest rates and inflation. We employ a Markov regime-switching structural VAR (MRS-SVAR) to investigate whether the price puzzle is present at regimes where there is violation of the Taylor principle. Our results suggest that the price puzzle is a regime-dependent phenomenon driven by passive monetary policy and Choleski identifying restrictions.
Metadata
Authors/Creators:
Arestis, P.
Karoglou, M.
Mouratidis, K.
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