Decomposing the Effects of Monetary Policy Using an External Instruments SVAR

We study the effects of monetary policy on economic activity separately identifying the effects of a conventional change in the fed funds rate from the policy of forward guidance. We use a structural VAR identified using external instruments from futures market data. The response of output to a fed funds rate shock is found to be consistent with typical monetary VAR analyses. However, the effect of a forward guidance shock that increases long-term interest rates has an expansionary effect on output. This counterintuitive response is shown to be tied to the asymmetric information between the Federal Reserve and the public

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Year of publication:	2017
Authors:	Lakdawala, Aeimit
Publisher:	[S.l.] : SSRN
Subject:	Geldpolitik \| Monetary policy \| VAR-Modell \| VAR model \| Wirkungsanalyse \| Impact assessment \| Schock \| Shock \| Dekompositionsverfahren \| Decomposition method

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