Identifying vars based on high frequency futures data

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Identifying vars based on high frequency futures data

Author Info

Jon Faust
Eric Swanson
and Jonathan H. Wright

Additional information is available for the following registered author(s):

Eric Thomas Swanson

Abstract

Using the prices of federal funds futures contracts, we measure the impact of the surprise component of Federal Reserve policy decisions on the expected future trajectory of interest rates. We show how this information can be used to identify the effects of a monetary policy shock in a standard monetary policy VAR. This constitutes an alternative approach to identification that is quite different, and, we would argue, more plausible, than the conventional short-run restrictions. We find that the usual recursive identification of the model is rejected, but we nevertheless agree with the literature's conclusion that only a small fraction of the variance of output can be attributed to monetary policy shocks.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 720.

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Date of creation: 2002
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Handle: RePEc:fip:fedgif:720

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Article
- Faust, Jon & Swanson, Eric T. & Wright, Jonathan H., 2004. "Identifying VARS based on high frequency futures data," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1107-1131, September. [Downloadable!] (restricted)

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-04-25 (All new papers)
NEP-ETS-2002-04-25 (Econometric Time Series)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
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