Monetary policy, external instruments and heteroskedasticity

Saved in:

Authors and Corporations:

Schlaak, Thore (Author), Rieth, Malte (Author), Podstawski, Maximilian (Author)

Other Authors:

Rieth, Malte [Author] • Podstawski, Maximilian [Author]

Edition:

This version: June 18, 2021

Type of Resource:

E-Book

Language:

English

published:

Berlin DIW Berlin, German Institute for Economic Research 2021

Series:

Subjects:

Monetary policy

structural vector autoregressions

identification with external instrument

heteroskedasticity

Markov switching

Graue Literatur

Source:

Verbunddaten SWB
Lizenzfreie Online-Ressourcen

Description
Summary:	We develop a structural vector autoregressive framework that combines external instruments and heteroskedasticity for identification of monetary policy shocks. We show that exploiting both types of information sharpens structural inference, allows testing the relevance and exogeneity condition for instruments separately using likelihood ratio tests, and facilitates the economic interpretation of the structural shock of interest. We test alternative instruments and find that narrative and model-based measures are valid, while high-frequency data instruments show signs of invalidity. Finally, we document that monetary shocks identified with both a valid instrument and heteroskedasticity have larger effects on production and prices than monetary shocks identified via an instrument only.
Physical Description:	1 Online-Ressource (circa 73 Seiten); Illustrationen