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Drifts and volatilities under measurement error: Assessing monetary policy shocks over the last century

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  • Pooyan Amir‐Ahmadi
  • Christian Matthes
  • Mu‐Chun Wang

Abstract

How much have the dynamics of U.S. time series changed over the last century? Has the evolution of the Federal Reserve as an institution over the 100 years altered the transmission of monetary policy shocks? To tackle these questions, we build a multivariate time series model with time‐varying parameters and stochastic volatility that features measurement errors in observables. We find substantial changes in the structure of the economy. There is also large variation in the impact of monetary policy shocks, but the majority of this variation is driven by changes in exogenous volatility.

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  • Pooyan Amir‐Ahmadi & Christian Matthes & Mu‐Chun Wang, 2016. "Drifts and volatilities under measurement error: Assessing monetary policy shocks over the last century," Quantitative Economics, Econometric Society, vol. 7(2), pages 591-611, July.
  • Handle: RePEc:wly:quante:v:7:y:2016:i:2:p:591-611
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    Citations

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    Cited by:

    1. Amir-Ahmadi, Pooyan & Matthes, Christian & Wang, Mu-Chun, 2017. "Measurement errors and monetary policy: Then and now," Journal of Economic Dynamics and Control, Elsevier, vol. 79(C), pages 66-78.
    2. Aruoba, S. Borağan & Bocola, Luigi & Schorfheide, Frank, 2017. "Assessing DSGE model nonlinearities," Journal of Economic Dynamics and Control, Elsevier, vol. 83(C), pages 34-54.
    3. Andrew Owens & Thomas A. Lubik & Christian Matthes, 2016. "Beveridge Curve Shifts and Time-Varying Parameter VARs," Economic Quarterly, Federal Reserve Bank of Richmond, pages 197-226.
    4. Taeyoung Doh, 2017. "Trend and Uncertainty in the Long-Term Real Interest Rate: Bayesian Exponential Tilting with Survey Data," Research Working Paper RWP 17-8, Federal Reserve Bank of Kansas City, revised 31 Jul 2017.
    5. Njindan Iyke, Bernard, 2016. "Are Monetary Policy Disturbances Important in Ghana? Some Evidence from Agnostic Identification," MPRA Paper 70205, University Library of Munich, Germany.
    6. repec:fip:fedreb:00079 is not listed on IDEAS
    7. Wang, Mu-Chun, 2018. "Choosing Prior Hyperparameters: With Applications To Time-Varying Parameter Models," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181621, Verein für Socialpolitik / German Economic Association.
    8. Christian Matthes & Thomas A. Lubik, 2015. "Time-Varying Parameter Vector Autoregressions: Specification, Estimation, and an Application," Economic Quarterly, Federal Reserve Bank of Richmond, pages 323-352.
    9. Christian Matthes & Mu-Chun Wang & Pooyan Amir-Ahmadi, 2016. "Choosing Prior Hyperparameters," Working Paper 16-9, Federal Reserve Bank of Richmond, revised 23 Aug 2016.
    10. Laura Liu & Christian Matthes & Katerina Petrova & Jessica Sackett Romero, 2019. "Monetary Policy across Space and Time," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond.

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