Work

The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure

Year: 2015

Type: article

Abstract: Following Leeper, Sims, and Zha (1996), we identify monetary policy shocks in SVARs by restricting the systematic component of monetary policy. In particular, we impose sign and zero restrictions only on the monetary policy equation. Since we do not restrict the response of output to a monetary policy shock, we are agnostic in Uhlig's (2005) sense. But, in contrast to Uhlig (2005), our results support the conventional view that a monetary policy shock leads to a decline in output. Hence, our results show that the contractionary effects of monetary policy shocks do not hinge on questionable exclusion restrictions.

Source: International Finance Discussion Paper

DOI: 10.17016/ifdp.2015.1131

Authors: Jonas E. Arias, Dario Caldara, Juan F. Rubio-Ramirez

Institutions: Federal Reserve, Federal Reserve Board of Governors, Federal Reserve Bank of Atlanta, Duke University

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Funders: National Science Foundation, Banco de España

Award: G6899117513