Since dollarized countries import US monetary policy, identifying US monetary shocks through sign restrictions on US variables only, does not use all available information. In this paper we therefore include dollarized countries,which enable us to restrict more variables and leave the responses of US output and prices unrestricted (to allow for the working capital view of monetary shocks). We find only little evidence for the latter in the US, as prices fall immediately after most contractionary shocks that we identify. Furthermore, monetary shocks do not seem to have a clear effect on real GDP.
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