Identification of Monetary Policy Shocks: A graphical causal approach
AbstractThis paper develops a structural VAR methodology based on graphical models to identify the monetary policy shocks and to measure their macroeconomic effects. The advantage of this procedure is to work with testable overidentifying models, whose restrictions are derived by the partial correlations among residuals plus some institutional knowledge. This permits to test some restrictions on the reserve market used in several approaches existing in the literature. The main findings are that neither VAR innovations to federal funds rate nor innovations to nonborrowed reserves are good indicators of monetary policy shocks.
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Bibliographic InfoArticle provided by Faculdade de Economia, Universidade de Coimbra in its journal Notas Económicas.
Volume (Year): (2004)
Issue (Month): 20 (December)
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- Alessio Moneta, 2003. "Graphical Models for Structural Vector Autoregressions," LEM Papers Series 2003/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Alessio Moneta, 2008. "Graphical causal models and VARs: an empirical assessment of the real business cycles hypothesis," Empirical Economics, Springer, vol. 35(2), pages 275-300, September.
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