Information from financial markets and VAR measures of monetary policy

Exogenous measures of monetary policy shocks, directly derived from financi al market information, are used in close (US) and open (US-Germany) economy VAR models to evaluate the robustness of the dynamic effect of monetary po licy obtained from traditional identified VAR. The empirical analysis confi rms the main features of the monetary policy transmission mechanism in US a nd Germany, explicitly addressing the issue of simultaneity between the Ger man policy interest rate and the US dollar-DMark exchange rate. (C) 1999 El sevier Science B.V. All rights reserved. JEL classification: E44; E52; F41.