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Correctly identifying the effects of monetary policy innovations is necessary for good policy making. In this paper, the authors carry out a controlled experiment using a Structural Vector Auto-Regression (SVAR) model to trace the effects of monetary policy shocks on output and prices in Nigeria. The authors make the assumption that the Central Bank cannot observe unexpected changes in output and prices within the same period. This places a recursive restriction on the disturbances of the SVAR. The authors conduct the experiment using three alternative policy instruments.
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