Does money matter for the identification of monetary policy shocks: A DSGE perspective

Monetary policy shocks and financial conditions: A Monte Carlo experiment

“…The empirical support for an active financial wealth effect is relevant in light of the policy prescriptions conditional on an active financial wealth effect recently proposed by Nisticò (2007), Airaudo et al (2008), andNisticò (2011). conditions under the true data generating process. Therefore, our results cast doubts on the recursive scheme as suited to identify the effects of a monetary policy shock on financial conditions, therefore calling for the employment of alternative identification schemes allowing for contemporaneous interactions between the financial and the real sides of the economy, such as non-recursive short-run restrictions as in Leeper and Roush (2003) and Poilly (2010), the mixture of short-and long-run restrictions (Bjørnland and Leitemo, 2008), and 'sign restrictions' (see Canova and Paustian, 2012 and the references therein). How relevant is this result from a policy standpoint?…”

“…Differently, a novel mix of short-and long-run restrictions deliver more reasonable reactions. A related paper is Poilly (2010), who investigates the consequences of estimating a medium-scale DSGE framework featuring complementarity in consumption and real-balances with indirect inference based on impulse response matching. She shows that the estimated structural parameters are sensitive to the VAR identification scheme.…”

Financial Education on Bank Lending and Economic Volatility in Taiwan

“…In fact, money aggregates have recently been ignored in the implementation of monetary policy, while the target interest rate has become more and more popular because it is relatively definitive; at the same time, it can avoid a tragedy of inflation (Romer, 2000;Ireland, 2004). However, Poilly (2010) argued that money aggregates and the interest rate as the two tools of monetary policy should be evaluated and determined simultaneously. In addition, FDI, international trade and the oil price should be critical for economic volatility.…”

Monetary policy shocks and Cholesky VARs: an assessment for the Euro area

“…Benati and Surico (2009) show that estimated VARs may display heteroskedasticity in a world in which, by construction, the DSGE model assumed to be the data-generating process is homoskedastic, but a policy break occurs. Poilly (2010) investigates the consequences of estimating a medium-scale DSGE framework featuring complementarity in consumption and real-balances with indirect inference based on impulse response matching. She shows that the estimated structural parameters are sensitive to the VAR identification scheme.…”