Does monetary policy generate recessions?

Christopher A. Sims, Tao Zha

Research output: Contribution to journalReview articlepeer-review

206 Scopus citations


We consider two kinds of answers to the title question: Do random shifts in monetary policy account for historical recessions, and would changes in the systematic component of monetary policy have allowed reductions in inflation or output variance without substantial costs. The answer to both questions is no. We use weak identifying assumptions and include extensive discussion of these assumptions, including a completely specified dynamic stochastic equilibrium model in which our identifying assumptions can be shown to be approximately satisfied.

Original languageEnglish (US)
Pages (from-to)231-272
Number of pages42
JournalMacroeconomic Dynamics
Issue number2
StatePublished - Apr 2006

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • Identification
  • Monetary Policy
  • Structural VAR


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