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Measurement Errors and Monetary Policy: Then and Now

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

Abstract

Should policymakers and applied macroeconomists worry about the difference between real-time and final data? We tackle this question by using a VAR with time-varying parameters and stochastic volatility to show that the distinctionbetween real-time data and final data matters for the impact of monetary policy shocks: The impact on final data is substantially and systematically different (in particular, larger in magnitude for different measures of real activity) from theimpact on real-time data. These differences have persisted over the last 40 years and should be taken into account when conducting or studying monetary policy.

Suggested Citation

  • Pooyan Amir-Ahmadi & Mu-Chun Wang & Christian Matthes, 2015. "Measurement Errors and Monetary Policy: Then and Now," Working Paper 15-13, Federal Reserve Bank of Richmond, revised 05 Nov 2015.
  • Handle: RePEc:fip:fedrwp:15-13
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    References listed on IDEAS

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    Cited by:

    1. C. Glocker & G. Sestieri & P. Towbin, 2017. "Time-varying fiscal spending multipliers in the UK," Working papers 643, Banque de France.
    2. Soojin Jo & Rodrigo Sekkel, 2016. "Macroeconomic Uncertainty Through the Lens of Professional Forecasters," Staff Working Papers 16-5, Bank of Canada.
    3. Glocker, Christian & Sestieri, Giulia & Towbin, Pascal, 2019. "Time-varying government spending multipliers in the UK," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 180-197.
    4. Christiane Baumeister & James D. Hamilton, 2019. "Structural Interpretation of Vector Autoregressions with Incomplete Identification: Revisiting the Role of Oil Supply and Demand Shocks," American Economic Review, American Economic Association, vol. 109(5), pages 1873-1910, May.

    More about this item

    Keywords

    stochastic volatility; impulse responses; time-varying parameters; real-time data;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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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