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Data revisions and the identification of monetary policy shocks

  • Dean Croushore
  • Charles L. Evans

Monetary policy research using time series methods has been criticized for using more information than the Federal Reserve had available in setting policy. To quantify the role of this criticism, we propose a method to estimate a VAR with real-time data while accounting for the latent nature of many economic variables, such as output. Our estimated monetary policy shocks are closely correlated with a typically estimated measure. The impulse response functions are broadly similar across the methods. Our evidence suggests that the use of revised data in VAR analyses of monetary policy shocks may not be a serious limitation.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 03-1.

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Date of creation: 2003
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Handle: RePEc:fip:fedpwp:03-1
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  11. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
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  30. Francis X. Diebold & Glenn D. Rudebusch, 1989. "Forecasting output with the composite leading index: an ex ante analysis," Finance and Economics Discussion Series 90, Board of Governors of the Federal Reserve System (U.S.).
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