Gaussian Mixture Approximations of Impulse Responses and the Nonlinear Effects of Monetary Shocks

Régis Barnichon and Christian Matthes

No 16-8, Working Paper from Federal Reserve Bank of Richmond

Abstract: This paper proposes a new method to estimate the (possibly nonlinear) dynamic effects of structural shocks by using Gaussian basis functions to parametrize impulse response functions. We apply our approach to the study of monetary policy and obtain two main results. First, regardless of whether we identify monetary shocks from (i) a timing restriction, (ii) sign restrictions, or (iii) a narrative approach, the effects of monetary policy are highly asymmetric: A contractionary shock has a strong adverse effect on unemployment, but an expansionary shock has little effect. Second, an expansionary shock may have some expansionary effect, but only when the labor market has some slack. In a tight labor market, an expansionary shock generates a burst of inflation and no significant change in unemployment.

JEL-codes: C14 C32 C51 E32 E52 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2014-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.richmondfed.org/-/media/richmondfedorg ... 2016/pdf/wp16-08.pdf Full text (application/pdf)

Related works:
Working Paper: Gaussian Mixture Approximations of Impulse Responses and The Non-Linear Effects of Monetary Shocks (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedrwp:16-08

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().