Reconciling narrative monetary policy disturbances with structural VAR model shocks?

- We document low correlation between narrative shocks and identified VAR model shocks.
- Narrative shocks as proxy variable in the VAR model slightly increase the correlation.
- One potential reason for this result is measurement error in the narrative account.
- Another candidate is misspecification of the VAR model.

Structural VAR studies disagree with narrative accounts about the history of monetary policy disturbances. We investigate whether employing the narrative monetary shocks as a proxy variable in a VAR model aligns both shock series. We find that it does not.