IDEAS home Printed from https://ideas.repec.org/a/eee/jmacro/v85y2025ics0164070425000321.html
   My bibliography  Save this article

Identifying monetary policy shocks through external constraints

Author

Listed:
  • Fusari, Francesco

Abstract

This paper proposes a new strategy for the identification of monetary policy shocks in structural vector autoregressions (SVARs). It combines sign restrictions on the impulse responses with external constraints on high-frequency surprises and central bank’s macroeconomic projections. I use this approach to evaluate the transmission of US monetary policy over the period 1965–2007. First, I find that contractionary monetary policy shocks unequivocally decrease output, sharpening the ambiguous implications of standard sign-restricted SVARs. Second, I show that these findings, differently from those obtained under alternative methodologies, remain valid even when inference is performed using a prior-robust Bayesian algorithm. Furthermore, my identification strategy is successful in recovering monetary shocks and monetary policy equations that are coherent, respectively, with narrative sign restrictions and restrictions on the systematic component of monetary policy. Finally, I show that this framework ensures great flexibility and is particularly convenient for the joint identification of monetary policy and central bank information shocks.

Suggested Citation

  • Fusari, Francesco, 2025. "Identifying monetary policy shocks through external constraints," Journal of Macroeconomics, Elsevier, vol. 85(C).
  • Handle: RePEc:eee:jmacro:v:85:y:2025:i:c:s0164070425000321
    DOI: 10.1016/j.jmacro.2025.103696
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0164070425000321
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jmacro.2025.103696?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

    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:eee:jmacro:v:85:y:2025:i:c:s0164070425000321. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.