The Price Puzzle in US Monetary Transmission: Policy Regime, Energy Information, and Structural Identification (1979-2026)

Identifier:  TFG:9578

Handle: https://hdl.handle.net/20.500.11797/TFG9578

Authors:  Sánchez Pagán, Mario

Abstract:
This study investigates the price puzzle in U.S. monetary transmission (1979–2026) using VAR models with Cholesky identification. A baseline model is compared against an expanded model incorporating energy data to test the informational hypothesis. The results reveal that the anomaly is regime-dependent: while the Volcker era shows a clean transmission, the Greenspan period exhibits a pronounced puzzle that is mitigated when energy is included. In the current cycle (Powell), energy accounts for 13.2% of inflation variance compared to 8.2% for interest rates, calling into question the Fed's exclusive credit for recent disinflation.