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Empirical analysis of policy interventions

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  • Eric Leeper
  • Tao Zha

Abstract

We construct linear projections of macro variables conditional on hypothetical paths of monetary policy, using as an example an identified VAR model. Hypothetical policies are restricted to ones where both the policy intervention and its impacts are consistent with history—otherwise the linear projections are likely to be unreliable. We use the approach to interpret Federal Reserve decisions, modeling their frequent reassessment in light of new information about the tradeoffs policymakers face. The interventions we consider matter: they can shift projected paths and probability distributions of macro variables in economically meaningful ways.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal Proceedings.

Volume (Year): (2002)
Issue (Month): Mar ()
Pages:

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Handle: RePEc:fip:fedfpr:y:2002:i:mar:x:1

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Keywords: Monetary policy;

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References

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  4. repec:wop:humbsf:1999-4 is not listed on IDEAS
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  13. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
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  22. Eric M. Leeper & Tao Zha, 2002. "Modest policy interventions," Working Paper 2002-19, Federal Reserve Bank of Atlanta.
  23. John C. Robertson & Ellis W. Tallman, 1999. "Improving forecasts of the federal funds rate in a policy model," Working Paper 99-3, Federal Reserve Bank of Atlanta.
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  25. Sims, Christopher A. & Zha, Tao, 2006. "Does Monetary Policy Generate Recessions?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(02), pages 231-272, April.
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Citations

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Cited by:
  1. Michael S. Hanson, 2006. "Varying Monetary Policy Regimes: A Vector Autoregressive Investigation," Wesleyan Economics Working Papers 2006-003, Wesleyan University, Department of Economics.
  2. Timothy Cogley & Thomas J. Sargent, 2003. "Drifts and volatilities: monetary policies and outcomes in the post WWII U.S," Working Paper 2003-25, Federal Reserve Bank of Atlanta.
  3. Uhlig, H.F.H.V.S., 2001. "Did the FED Surprise the Markets in 2001? A Case Study for Vars with Sign Restrictions," Discussion Paper 2001-88, Tilburg University, Center for Economic Research.
  4. Voss, G.M. & Willard, L.B., 2009. "Monetary policy and the exchange rate: Evidence from a two-country model," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 708-720, December.
  5. Glenn D. Rudebusch, 2002. "Assessing the Lucas critique in monetary policy models," Working Paper Series 2002-02, Federal Reserve Bank of San Francisco.
  6. Christopher Sims & Tao Zha, 2002. "Macroeconomic switching," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  7. SOOREEA, Rajeev, 2007. "Are Taylor-Based Monetary Policy Rules Forward-Looking?. An Investigation Using Superexogeneity Tests," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(2), pages 87-94.
  8. Humala, Alberto & Rodríguez, Gabriel, 2009. "Estimation of a Time Varying Natural Interest Rate for Peru," Working Papers 2009-009, Banco Central de Reserva del Perú.
  9. Leeper, Eric M. & Zha, Tao, 2003. "Modest policy interventions," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1673-1700, November.
  10. Eric Leeper, 2003. "An "Inflation Reports" Report," NBER Working Papers 10089, National Bureau of Economic Research, Inc.
  11. Kociecki, Andrzej, 2013. "Bayesian Approach and Identification," MPRA Paper 46538, University Library of Munich, Germany.
  12. Jean-Stephane Mesonnier & Jean-Paul Renne, 2004. "A Time Varying Natural Rate of Interest for the Euro Area," Money Macro and Finance (MMF) Research Group Conference 2004 42, Money Macro and Finance Research Group.
  13. Mésonnier, J-S. & Renne, J-P., 2004. "A Time-Varying Natural Rate for the Euro Area," Working papers 115, Banque de France.

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