Regulatory Alerts2026-06-01
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Effects of monetary policy in small open economies during the inflation targeting period
Sveriges Riksbank researchers analyze monetary policy transmission in ten inflation-targeting small open economies using a standardized structural VAR framework. The study finds that aggregate policy effects align with macroeconomic theory and are statistically similar to those in larger economies, with cross-country heterogeneity driven primarily by transmission elasticities like the Phillips slope and exchange rate pass-through. Additionally, the analysis reveals that inflation response estimates are sensitive to identification strategies, often exhibiting a price puzzle under short-run restrictions that disappears when using core inflation measures or sign restrictions.
Topics
monetary
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