Monetary policy shocks, set-identifying restrictions, and asset prices: A benchmarking approach for analyzing set-identified models

Gábor Uhrin () and Helmut Herwartz

No 295, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: A central question for monetary policy is how asset prices respond to a monetary policy shock. We provide evidence on this issue by augmenting a monetary SVAR for US data with an asset price index, using set-identifying structural restrictions. The impulse responses show a positive asset price response to a contractionary monetary policy shock. The resulting monetary policy shocks correlate weakly with the Romer and Romer (2004) (RR) shocks, which matters greatly when analyzing impulse responses. Considering only models with shocks highly correlated with the RR series uncovers a negative, but near-zero response of asset prices.

Keywords: monetary policy shocks; asset prices; sign restrictions; zero restrictions; set identification; structural VAR models (search for similar items in EconPapers)
JEL-codes: C32 E44 E52 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:295

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