Revisiting the Macroeconomic Effects of Monetary Policy Shocks*

This study re‐evaluates the macroeconomic impact of monetary policy shocks in the United States using the proxy‐SVAR approach of Gertler and Karadi ( American Economic Journal: Macroeconomics , 2015, 7, 44–76). Despite increased credit costs and the presence of the credit channel, our analysis reveals modest effects on economic activity post‐mid‐1980s. This robust finding holds across various inference methods and sample considerations. A counterfactual analysis within the framework of Bernanke, Gertler, and Gilchrist (1999, Handbook of Macroeconomics , Elsevier) suggests that a stronger response to inflation in monetary policy execution may explain the subdued impact of shocks, offering valuable insights for policy refinement and understanding the dynamics of economic activity.