The systematic component of monetary policy in SVARs: An agnostic identification procedure

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper studies the effects of monetary policy shocks using structural vector autoregressions (SVARs). We achieve identification by imposing sign and zero restrictions on the systematic component of monetary policy. We consistently find that an increase in the fed funds rate induces a contraction in output. We also show that the identification strategy in Uhlig (2005), which imposes sign restrictions on the impulse responses to a monetary shock, does not satisfy our restrictions on the systematic component of monetary policy with high posterior probability. This finding accounts for the difference in results with Uhlig (2005), who found that contractionary monetary policy shocks have no clear effect on output. When we reconcile the two approaches by combining both sets of restrictions, monetary policy shocks remain contractionary. Terms of use: Documents inJEL classification: E52, C51

The Nexus between Public Debt and the Government Spending Multiplier: Fiscal Adjustments Matter*

“…We achieve identi…cation by imposing sign and zero restrictions on the systematic component of policy rules as well as impulse response functions. We apply the SVAR methodology of Arias et al (2019) to a TVP-VAR framework and extend it by imposing restrictions on the …scal policy equation.…”

“…In line with the standard speci…cation of the Taylor rule, we assume that the central 19 Table A.1 in the Online Appendix provides a summary of the sign and zero restrictions imposed on the systematic component of the monetary and …scal policy equations as well as those on the short-and long-run impulse responses. bank only reacts contemporaneously to an increase in output and prices by raising the interest rate as in Arias et al (2019). This assumption implies ' g;t = ' d;t = 0 and ' y;t , ' p;t > 0.…”

“…We combine the sign restrictions on impulse responses described above with sign and zero restrictions on the systematic component of monetary and …scal policy equations. 19 Following Arias et al (2019), we concentrate on the contemporaneous coe¢cients of the policy equations as it is more controversial to impose restrictions on lagged coe¢cients.…”

“…Arias et al (2019) report the posterior median estimates for the coe¢cients for output and in ‡ation as 0.84 and 2.73, respectively.31Belongia and Ireland (2016) estimate the monetary policy equation that includes a time-varying intercept terms, time-varying coe¢cients for the current and two lagged values of in ‡ation and the output gap and the lags of the interest rate. Using the coe…cients for the lagged values, they also report estimates for the long-run coe¢cients, the median values of which are about twice as large as those of the impact coe¢cients Canova and Gambetti (2009).…”

Credit Supply in Venezuela: A Non-Conventional Bank Lending Channel?

“…For all shocks identified, variables responses remain significant at least during the first year, meaning that shocks elicit strong 12 Hence, we are implementing an "agnostic" type of identification strategy, as proposed in Uligh (2005). This type of identification is also pursued in Arias, Caldara and Rubio-Ramírez (2015). …”