Carvalho, Carlos Viana de; Eusepi, Stefano; Mönch, Emanuel - 2021
Ordinary Least Squares (OLS) estimation of monetary policy rules produces potentially inconsistent estimates of policy … monetary policy shocks. Endogeneity implies a correlation between regressors and the error term, and hence, an asymptotic bias …. In principle, Instrumental Variables (IV) estimation can solve this endogeneity problem. In practice, IV estimation poses …