Time Varying Structural Vector Autoregressions and Monetary Policy
Monetary policy and the private sector behaviour of the U.S. economy are modelled as a time varying structural vector autoregression, where the sources of time variation are both the coefficients and the variance covariance matrix of the innovations. The paper develops a new, simple modelling strategy for the law of motion of the variance covariance matrix and proposes an efficient Markov chain Monte Carlo algorithm for the model likelihood/posterior numerical evaluation. The main empirical conclusions are: (1) both systematic and non-systematic monetary policy have changed during the last 40 years—in particular, systematic responses of the interest rate to inflation and unemployment exhibit a trend toward a more aggressive behaviour, despite remarkable oscillations; (2) this has had a negligible effect on the rest of the economy. The role played by exogenous non-policy shocks seems more important than interest rate policy in explaining the high inflation and unemployment episodes in recent U.S. economic history. Copyright 2005, Wiley-Blackwell.
Year of publication: |
2005
|
---|---|
Authors: | Primiceri, Giorgio E. |
Published in: |
Review of Economic Studies. - Oxford University Press. - Vol. 72.2005, 3, p. 821-852
|
Publisher: |
Oxford University Press |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Investment shocks and business cycles
Justiniano, Alejandro, (2008)
-
Credit supply and the housing boom
Justiniano, Alejandro, (2015)
-
Household leveraging and deleveraging
Justiniano, Alejandro, (2013)
- More ...