THE DYNAMIC IMPACTS OF MONETARY-POLICY - AN EXERCISE IN TENTATIVE IDENTIFICATION

It is currently popular to identify monetary policy shocks with innova tions in some measure of reserves or in the federal funds rate. These assumptions about the interest elasticity of the supply of or demand f or reserves imply monetary policy shocks that produce dynamic response s of macroeconomic variables that are anomalous relative to traditiona l monetary analyses. This paper tentatively identifies supply and dema nd shocks in the markets for reserves and M2 for the 1980s and contras ts them with results for the 1970s. In the later period, identified mo netary policy shocks have dynamic impacts that are fully consistent wi th traditional analyses.