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Identification of Monetary Policy Shocks within a Svar Using Restrictions Consistent with a DSGE Model

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  • Nikolay Arefiev

    (National Research University Higher School of Economics)

Abstract

I identify and estimate the monetary policy rule and the monetary policy shocks within a structural vector autoregression model for the US economy. I make two contributions to the literature. First, for identi cation I propose to use restrictions consistent with the literature on dynamic stochastic general equilibrium (DSGE) models. Typical DSGE model produces more restrictions than is required for the identi cation, so overidentifying restrictions can be tested against the data. The second contribution is a new method of testing the overidentifying restrictions. This method divides the set of identifying restrictions into subsets, and tests each subset independently of the others. This method does not reject most restrictions produced by the DSGE model. The only rejections provide evidence that the Federal Reserve uses delayed information about the in ation in policy making. The proposed approach to identi cation helps explain and solve the price puzzle problem reported in the previous literature.

Suggested Citation

  • Nikolay Arefiev, 2016. "Identification of Monetary Policy Shocks within a Svar Using Restrictions Consistent with a DSGE Model," HSE Working papers WP BRP 125/EC/2016, National Research University Higher School of Economics.
  • Handle: RePEc:hig:wpaper:125/ec/2016
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    References listed on IDEAS

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    More about this item

    Keywords

    graphical identi cation; sparse SVAR; price puzzle.;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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