Inferring monetary policy objectives with a partially observed state

Givens, Gregory Erin; Salemi, Michael K.

doi:10.1016/j.jedc.2014.11.008

Cited by 6 publications

(3 citation statements)

References 86 publications

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“…The estimation problem is computationally reasonably straightforward, but time consuming since we have to solve a linear-quadratic dynamic programming problem and a linear rational expectations model every period for every draw. 18 5 Estimation Results Figure 3 shows the marginal posterior distributions for each parameter that we estimate,…”

Section: Likelihood Function and Bayesian Inferencementioning

confidence: 99%

Indeterminacy and Learning: An Analysis of Monetary Policy in the Great Inflation

Lubik

Matthes

2014

SSRN Journal

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Section: Likelihood Function and Bayesian Inferencementioning

confidence: 99%

Indeterminacy and Learning: An Analysis of Monetary Policy in the Great Inflation

Lubik

Matthes

2014

SSRN Journal

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“…Chen et al (2017b) showed in a DSGE set-up that the conservatism regarding inflation targeting by the US Fed decreased substantially during times of financial turbulence. Givens and Salemi (2015) used a similar DSGE set up to show that the central bank's uncertainty regarding state of the economy in the real time, plays an important role under discretionary policy regime. In particular, the inferred policy stances evolve substantially over time.…”

Section: Indian Institute Of Management Ahmedabad -380015 India 1 Introductionmentioning

confidence: 99%

A computational algorithm to analyze unobserved sequential reactions of the central banks: inference on complex lead–lag relationship in evolution of policy stances

Chakrabarti

Kumar

2019

J Comput Soc Sc

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Central banks of different countries are some of the largest economic players at the global scale and they are not static in their monetary policy stances. They change their policies substantially over time in response to idiosyncratic or global factors affecting the economies. A very prominent and empirically documented feature arising out of central banks' actions, is that the relative importance assigned to inflation vis-a-vis output fluctuations evolve substantially over time. We analyze the leading and lagging behavior of central banks of various countries in terms of adopting low inflationary environment vis-a-vis high weight assigned to counteract output fluctuations, in a completely data-driven way. To this end, we propose a new methodology by combining complex Hilbert principle component analysis with state-space models in the form of Kalman filter. The CHPCA mechanism is non-parametric and provides a clean identification of leading and lagging behavior in terms of phase differences of time series in the complex plane. We show that the methodology is useful to characterize the extent of coordination (or lack thereof), of monetary policy stances taken by central banks in a cross-section of developed and developing countries. In particular, the analysis suggests that US Fed led other countries central banks in the pre-crisis period in terms of pursuing low-inflationary regimes.

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“…Additionally, they assess the output gap inflation tradeoff facing the ECB. Givens and Salemi (2015) estimate an NK model with optimal discretionary policy using real-time and ex-post US data for the 1965-2010 period.…”

Section: Introductionmentioning

confidence: 99%

Essays on Structural Changes, US Business Cycles and Monetary Policy

Brault¹

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In this thesis I study a major structural change in the US economy, namely, the consequences of the Great Moderation on the US economy and the operation of monetary policy.My first chapter explores a variety of empirical relationships on lead-lag properties of the US business cycle and how these relationships have changed since the onset of the Great Moderation. We emphasize four major changes in lead-lag properties. Since these relationships serve as a benchmark for many models of the business cycle, we examine if a variety of models can account for these changes. We find that they cannot.My second chapter provides an explanation for the first property in my first chapter, that the real interest rate switched from negatively leading the US business cycle to positively lagging. The explanation rests on the fact that uncertainty about the current state of the economy has become less severe since the onset of the Great Moderation. This allows policymakers to set monetary policy closer to their rule-based policy prescription under no uncertainty and reduce unintended monetary induced fluctuations.My third chapter explores business cycle asymmetry prior to and after the Great Moderation. I show that the business cycle has become more asymmetric since the onset of the Great Moderation with booms becoming smaller and busts staying relatively the same. I highlight that this type of asymmetry is consistent with a class of models which feature occasionally binding collateral constraints. i I thank my supervisor, Hashmat Khan, for his support and guidance throughout my PhD. I learned a great amount from him and always enjoyed our collaborations. He has always been supportive and enthusiastic about my work, which made my PhD a very enjoyable experience. I am looking forward to our future collaborations.I also thank my thesis committee members Chris Gunn and Lilia Karnizova. They have always provided great feedback on my work and been available for any of my questions. Both of them have always extended opportunities to put a spotlight on my work through presentations and meetings with external speakers, which I always appreciated. I am particularly thankful to Dana Galizia for his input into many of my papers, attending my seminars, and providing feedback. I was a research assistant to Dana for an extended period of time during my PhD which was very beneficial to me.I also thank the economics faculty at Carleton University. I have benefited from my interactions with them throughout my PhD and received feedback from many in my preparation for the job market.Lastly, I would like to thank all the administrative staff in the Department of Economics throughout my PhD:

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Inferring monetary policy objectives with a partially observed state

Cited by 6 publications

References 86 publications

Indeterminacy and Learning: An Analysis of Monetary Policy in the Great Inflation

Indeterminacy and Learning: An Analysis of Monetary Policy in the Great Inflation

A computational algorithm to analyze unobserved sequential reactions of the central banks: inference on complex lead–lag relationship in evolution of policy stances

Essays on Structural Changes, US Business Cycles and Monetary Policy

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