Gimme a Break! Identification and Estimation of the Macroeconomic Effects of Monetary Policy Shocks in the U.S

Emanuele Bacchiocchi, Efrem Castelnuovo and Luca Fanelli ()

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: We employ a non-recursive identification scheme to identify the effects of a monetary policy shock in a Structural Vector Autoregressive (SVARs) model for the U.S. post-WWII quarterly data. The identification of the shock is achieved via heteroskedasticity, and different on-impact macroeconomic responses are allowed for (but not imposed) in each volatility regime. We show that the impulse responses obtained with the suggested non-recursive identification scheme are quite similar to those conditional on a recursive VAR estimated with pre-1984 data. In contrast, recursive vs. non-recursive identification schemes return different short-run responses of output and investment during the Great Moderation. Robustness checks dealing with a different definition of investment, an alternative breakpoint, and federal funds futures rates as an indicator of the monetary policy stance are documented and discussed.

Keywords: Structural break; recursive and non-recursive VARs; identification; monetary policy shocks; impulse responses (search for similar items in EconPapers)
JEL-codes: C32 C50 E52 (search for similar items in EconPapers)
Pages: 45pp
Date: 2016-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Gimme a break! Identification and estimation of the macroeconomic effects of monetary policy shocks in the U.S (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2016n31

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