Still puzzling: Evaluating the price puzzle in an empirically identified structural vector autoregression


Journal Article

The price puzzle, an increase in the price level associated with a contractionary monetary shock, is investigated in a rich, 12-variable SVAR in which various factors that have been mooted as solutions are considered jointly. SVARs for the pre-1980 and post-1990 periods are identified empirically using a graph-theoretic causal search algorithm combined with formal tests of the implied overidentifying restrictions. In this SVAR, the pre-1980 price puzzle depends on the characterization of monetary policy, and the post-1990 price puzzle is statistically insignificant. Commonly suggested theoretical resolutions to the price puzzle are shown to have causal implications inconsistent with the data. © 2013 Springer-Verlag Berlin Heidelberg.

Full Text

Duke Authors

Cited Authors

  • Demiralp, S; Hoover, KD; Perez, SJ

Published Date

  • March 1, 2014

Published In

Volume / Issue

  • 46 / 2

Start / End Page

  • 701 - 731

International Standard Serial Number (ISSN)

  • 0377-7332

Digital Object Identifier (DOI)

  • 10.1007/s00181-013-0694-5

Citation Source

  • Scopus