IDEAS home Printed from https://ideas.repec.org/a/aic/revebs/y2014d14rosoius.html
   My bibliography  Save this article

Monetary Policy Transmission Mechanism And Dynamic Factor Models

Author

Listed:
  • Andreea ROSOIU

    () (The Academy of Economic Studies, Bucharest, Romania)

Abstract

The main objective of a Central Bank is price stability, without neglecting, however, a sustainable economic growth in the long run. Therefore, an important challenge is to identify whether the effect of monetary policy has changed over time and for this purpose, a Dynamic Factor Model with time-varying parameters is estimated. The model is applied to Romanian economy, on a sample database consisting of 90 time series representing various macroeconomic variables. Monthly data, starting with 2000 and ending with 2013 are being used for the analysis. The reason for using a large dataset is to avoid issues such as omitting important information when considering a small set of variables. A much smaller number of Factors is extracted by using Principal Component Analysis and with these factors the TVP-FAVAR model is estimated. Time variation of the parameters allows for o comparative analysis of the monetary policy transmission mechanism in time. Once the impulse-response functions are estimated, several conclusions are to be drawn, such as: whether monetary policy actions have or do not have an impact over the evolution of the rest of the economy and whether the effect of these measures have changed over the years.

Suggested Citation

  • Andreea ROSOIU, 2014. "Monetary Policy Transmission Mechanism And Dynamic Factor Models," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 14, pages 199-206, December.
  • Handle: RePEc:aic:revebs:y:2014:d:14:rosoius
    as

    Download full text from publisher

    File URL: http://www.rebs.ro/articles/pdfs/218.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Dimitris Korobilis, 2013. "Assessing the Transmission of Monetary Policy Using Time-varying Parameter Dynamic Factor Models-super-," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(2), pages 157-179, April.
    2. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October.
    3. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2005. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 387-422.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Factor Augmented Vector Autoregression; Monetary Policy Transmission Mechanism; Romanian Economy; Time Varying Parameters;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aic:revebs:y:2014:d:14:rosoius. 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: (Sireteanu Napoleon-Alexandru). General contact details of provider: http://edirc.repec.org/data/feaicro.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.