Drifts and volatilities under measurement error: Assessing monetary policy shocks over the last century

Pooyan Amir-Ahmadi, Christian Matthes, Mu Chun Wang

Research output: Contribution to journalArticlepeer-review

Abstract

How much have the dynamics of U.S. time series changed over the last century? Has the evolution of the Federal Reserve as an institution over the 100 years altered the transmission of monetary policy shocks? To tackle these questions, we build a multivariate time series model with time-varying parameters and stochastic volatility that features measurement errors in observables. We find substantial changes in the structure of the economy. There is also large variation in the impact of monetary policy shocks, but the majority of this variation is driven by changes in exogenous volatility.

Original languageEnglish (US)
Pages (from-to)591-611
Number of pages21
JournalQuantitative Economics
Volume7
Issue number2
DOIs
StatePublished - Jul 1 2016
Externally publishedYes

Keywords

  • Bayesian VAR
  • U.S. monetary policy
  • measurement error
  • time variation

ASJC Scopus subject areas

  • Economics and Econometrics

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