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High-frequency instruments with time-varying reliability: Understanding identification in macroeconomics

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

Abstract

The effects of monetary policy shocks are regularly estimated using high-frequency sur- prises in asset prices around central bank meetings as an instrument. These studies, insofar as they explicitly model the relationship between instrument and structural shock, assume a constant relationship between the instrument and the monetary policy shock. By allowing for time variation in this relationship, we show that only a few distinct periods are infor- mative about monetary policy shocks. Therefore, we build a narrative for instrument-based identification. For the instrument in Gertler & Karadi (2015), the effect on the (log) price level is almost 50 percent larger than the standard specification would suggest.

Suggested Citation

  • Amir Ahmadi, Pooyan & Matthes, Christian & Wang, Mu-Chun, 2026. "High-frequency instruments with time-varying reliability: Understanding identification in macroeconomics," Discussion Papers 08/2026, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:338091
    DOI: 10.71734/DP-2026-8
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    References listed on IDEAS

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    6. Wenting Liao & Jun Ma & Chengsi Zhang, 2023. "Identifying exchange rate effects and spillovers of US monetary policy shocks in the presence of time‐varying instrument relevance," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 989-1006, November.
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