Research Discussion Paper – RDP 2020-01 Credit Spreads, Monetary Policy and the Price Puzzle

Contents

• Introduction
• Biased Romer and Romer Estimates – The Role of Credit Spreads
• The Cash Rate Response to Credit Market Conditions
• Credit Market Conditions and the Bank's Forecast Errors
• The Effects of Monetary Policy Shocks on Inflation, Unemployment and Output
• Robustness to Model Misspecification and the GFC Episode
• Conclusion
• Appendix A : Literature Review
• Appendix B : Derivation of Estimators
• Appendix C : Variable Definitions
• Appendix D : Further Robustness Tests and Results
• References

The Discussion Paper series is intended to make the results of the current economic research within the Reserve Bank available to other economists. Its aim is to present preliminary results of research so as to encourage discussion and comment. Views expressed in this paper are those of the authors and not necessarily those of the Reserve Bank. Use of any results from this paper should clearly attribute the work to the authors and not to the Reserve Bank of Australia.