Advanced Search
MyIDEAS: Login to save this paper or follow this series

On the Evolution of Monetary Policy

Contents:

Author Info

  • Gary Koop

    ()
    (University of Strathclyde, UK and The RImini Centre for Economic Analisys, Italy)

  • Roberto Leon-Gonzalez

    (National Graduate Institute for Policy Studies, Japan and The RImini Centre for Economic Analisys - Italy)

  • Rodney W. Strachan

    ()
    (University of Queensland, Australia and The RImini Centre for Economic Analisys - Italy)

Abstract

This paper investigates the evolution of monetary policy in the U.S. using a standard set of macroeconomic variables. Many recent papers have addressed the issue of whether the monetary transmission mechanism has changed (e.g. due to the Fed taking a more aggressive stance against in‡ation) or whether apparent changes are simply due to changes in the volatility of exogenous shocks. A subsidiary question is whether any such changes have been gradual or abrupt. In this paper, we shed light on these issues using a mixture innovation model which extends the class of time varying Vector Autoregressive models with stochastic volatility which have been used in the past. The advantage of our extension is that it allows us to estimate whether, where, when and how parameter change is occurring (as opposed to assuming a particular form of parameter change). Our empirical results strongly indicate that the transmission mechanism, the volatility of exogenous shocks and the correlations between exogenous shocks are all changing (albeit at different times and to di¤erent extents) Furthermore, evolution of parameters is gradual.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.rcfea.org/RePEc/pdf/wp24_08.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 24-08.

as in new window
Length:
Date of creation: Jan 2008
Date of revision: Jan 2008
Handle: RePEc:rim:rimwps:24-08

Contact details of provider:
Postal: Via Patara, 3, 47921 Rimini (RN)
Phone: +390541434142
Fax: +39054155431
Email:
Web page: http://www.rcfea.org
More information through EDIRC

Related research

Keywords: structural VAR; monetary policy; Bayesian; mixture innovation model; time varying parameter model;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Cogley, Timothy & Morozov, Sergei & Sargent, Thomas J., 2005. "Bayesian fan charts for U.K. inflation: Forecasting and sources of uncertainty in an evolving monetary system," Journal of Economic Dynamics and Control, Elsevier, vol. 29(11), pages 1893-1925, November.
  2. Thomas A. Lubik & Frank Schorfheide, 2004. "Testing for Indeterminacy: An Application to U.S. Monetary Policy," American Economic Review, American Economic Association, vol. 94(1), pages 190-217, March.
  3. M. Hashem Pesaran & Davide Pettenuzzo & Allan Timmermann, 2004. "Forecasting Time Series Subject to Multiple Structural Breaks," CESifo Working Paper Series 1237, CESifo Group Munich.
  4. 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.
  5. Llubos Pástor, 2001. "The Equity Premium and Structural Breaks," Journal of Finance, American Finance Association, vol. 56(4), pages 1207-1239, 08.
  6. Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 869-902, August.
  7. Giordani, Paolo & Kohn, Robert, 2006. "Efficient Bayesian Inference for Multiple Change-Point and Mixture Innovation Models," Working Paper Series 196, Sveriges Riksbank (Central Bank of Sweden).
  8. Timothy Cogley & Thomas J. Sargent, 2002. "Evolving Post-World War II U.S. Inflation Dynamics," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 331-388 National Bureau of Economic Research, Inc.
  9. Gary M. Koop & Simon M. Potter, 2004. "Prior elicitation in multiple change-point models," Staff Reports 197, Federal Reserve Bank of New York.
  10. Koop, Gary, 1996. "Parameter uncertainty and impulse response analysis," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 135-149.
  11. John M. Maheu & Stephen Gordon, 2004. "Learning, Forecasting and Structural Breaks," Cahiers de recherche 0422, CIRPEE.
  12. Jean Boivin & Marc P. Giannoni, 2003. "Has Monetary Policy Become More Effective?," NBER Working Papers 9459, National Bureau of Economic Research, Inc.
  13. James H. Stock & Mark W. Watson, 2001. "Vector Autoregressions," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 101-115, Fall.
  14. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  15. Gary Koop & Simon M. Potter, 2007. "Estimation and Forecasting in Models with Multiple Breaks," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 763-789.
  16. J. Durbin, 2002. "A simple and efficient simulation smoother for state space time series analysis," Biometrika, Biometrika Trust, vol. 89(3), pages 603-616, August.
  17. Chib, Siddhartha, 1998. "Estimation and comparison of multiple change-point models," Journal of Econometrics, Elsevier, vol. 86(2), pages 221-241, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Koop, Gary & Korobilis, Dimitris, 2012. "Large Time-Varying Parameter VARs," SIRE Discussion Papers 2012-14, Scottish Institute for Research in Economics (SIRE).
  2. Chan, Joshua & Strachan, Rodney, 2012. "Estimation in Non-Linear Non-Gaussian State Space Models with Precision-Based Methods," MPRA Paper 39360, University Library of Munich, Germany.
  3. Michal Franta & Roman Horvath & Marek Rusnak, 2014. "Evaluating changes in the monetary transmission mechanism in the Czech Republic," Empirical Economics, Springer, vol. 46(3), pages 827-842, May.
  4. Hollmayr, Josef & Matthes, Christian, 2013. "Learning about fiscal policy and the effects of policy uncertainty," Discussion Papers 51/2013, Deutsche Bundesbank, Research Centre.
  5. Chauvet, Marcelle & Tierney, Heather L. R., 2007. "Real Time Changes in Monetary Policy," MPRA Paper 16199, University Library of Munich, Germany, revised Apr 2009.
  6. Cléaud, G. & Lemoine, M. & Pionnier, P.-A., 2013. "Which size and evolution of the government expenditure multiplier in France (1980-2010)?," Working papers 469, Banque de France.
  7. Gary Koop & Roberto Leon-Gonzalez & Rodney W. Strachan, 2008. "Dynamic probabilities of restrictions in state space models: An application to the Phillips curve," Working Paper Series 26-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
  8. Michele Campolieti & Deborah Gefang & Gary Koop, 2011. "Time Variation in the Dynamics of Worker Flows: Evidence from the US and Canada," Working Papers 1138, University of Strathclyde Business School, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rim:rimwps:24-08. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roberto Patuelli).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.