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Research Shows Impact Of Monetary Policy Shock Could Be Longer

RBA

A new Research Discussion Paper by the RBA that estimates the effects of a positive monetary shock finds strong evidence that it reduces output and prices for longer than a year. The results show, and it is noted that the conclusions don’t reflect the RBA’s view, that a 100bp monetary policy shock would reduce output by at least 0.5% after 2 years. This is at the upper end of estimates from the RBA’s models and suggests that the impact could be longer. This was also found to be the case with unemployment.

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