Measurement errors and monetary policy: Then and now

Pooyan Amir-Ahmadi, Christian Matthes, Mu Chun Wang

Research output: Contribution to journalArticlepeer-review

Abstract

Should policymakers and applied macroeconomists worry about the difference between real-time and final data? We tackle this question by using a Bayesian VAR with time-varying parameters and stochastic volatility to show that the distinction between real-time data and final data matters for the impact of monetary policy shocks: The impact on final data is substantially and systematically different (in particular, larger in magnitude for different measures of real activity) from the impact on real-time data. These differences have persisted over the last 40 years and should be taken into account when conducting or studying monetary policy.

Original languageEnglish (US)
Pages (from-to)66-78
Number of pages13
JournalJournal of Economic Dynamics and Control
Volume79
DOIs
StatePublished - Jun 1 2017

Keywords

  • Impulse responses
  • Real-time data
  • Stochastic volatility
  • Time-varying parameters

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

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