An Analysis of Monetary Policy Evidence and Theory through Meta-Analyses

Abstract: This paper offers a synthesis of the empirical literature on the effects of monetary policy. Using the findings from an extensive collection of meta-analyses, it evaluates the effectiveness of conventional and unconventional monetary policy instruments on key macroeconomic variables such as output, inflation, capital flows, and the exchange rate. The aggregated evidence reveals a systematic gap between the effects reported in primary studies and the actual magnitude of these effects, once corrected for publication bias and methodological heterogeneity. The findings suggest that, while monetary policy is a relevant tool, its power to modulate the business cycle has been consistently overestimated in the literature. Contextual factors - such as the degree of financial development, the exchange rate regime, central bank independence, and crisis conditions - that modulate the transmission of monetary policy are identified. In particular, it is found that publication bias systematically favors statistically significant results consistent with predominant theory, which artificially inflates the perception of effectiveness. By correcting these distortions, a picture of monetary policy emerges with more modest, uncertain effects and considerable lags, which has profound implications for macroeconomic theory and the practice of economic policy.