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A method to generate structural impulse-responses for measuring the effects of shocks in structural macro models

Author

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  • Beyer, Andreas
  • Farmer, Roger E. A.

Abstract

We develop a technique for analyzing the response dynamics of economic variables to structural shocks in linear rational expectations models. Our work differs fromstandard SVARs since we allow expectations of future variables to enter structural equations. We show how to estimate the variance-covariance matrix of fundamental and non-fundamental shocks and we construct point estimates and confidence bounds for impulse response functions. Our technique can handle both determinate and indeterminate equilibria. We provide an application to U.S. monetary policy under pre and post Volcker monetary policy rules. JEL Classification: C39, C62, D51, E52, E58

Suggested Citation

  • Beyer, Andreas & Farmer, Roger E. A., 2006. "A method to generate structural impulse-responses for measuring the effects of shocks in structural macro models," Working Paper Series 586, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2006586
    Note: 336354
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    References listed on IDEAS

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    Citations

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    3. Robalo Marques, Carlos & Dias, Daniel & Santos Silva, João M. C., 2006. "Measuring the importance of the uniform nonsynchronization hypothesis," Working Paper Series 606, European Central Bank.

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    More about this item

    Keywords

    identification; indeterminacy; rational expectations models.;
    All these keywords.

    JEL classification:

    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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