Do Measures of Monetary Policy in a VAR Make Sense?

In many VARs, monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables. Such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the Fed's reaction function; furthermore, the residuals from these regressions have little correlation with funds rate shocks that are derived from forward-looking financial markets.

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Year of publication:	1996
Authors:	Rudebusch, G.D.
Institutions:	Banca d'Italia
Subject:	MONETARY POLICY \| ECONOMETRICS \| CENTRAL BANKS \| FINANCIAL MARKET

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Series:	Banca Italia - Servizio di Studi.
Type of publication:	Book / Working Paper
Notes:	34 pages
Classification:	C10 - Econometric and Statistical Methods: General. General ; C13 - Estimation ; E50 - Monetary Policy, Central Banking and the Supply of Money and Credit. General ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005780700