Monetary policy shocks may have larger real effects than previously thought.
The study shows that recent research on how monetary policy affects the economy can be explained by standard models. Some findings suggesting that tight monetary policy boosts output are actually due to misidentifying other types of economic shocks. Traditional restrictions miss some short-term effects, but new methods focusing on Taylor rules and external factors work better. Overall, the evidence suggests that the real impact of monetary policy on the economy is bigger than previously thought.