Do Measures of Monetary Policy in a VAR Make Sense?

Glenn Rudebusch

Working Papers from Banca Italia - Servizio di Studi

Abstract: In many VARs, monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables. Such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the Fed's reaction function; furthermore, the residuals from these regressions have little correlation with funds rate shocks that are derived from forward-looking financial markets.

Keywords: MONETARY POLICY; ECONOMETRICS; CENTRAL BANKS; FINANCIAL MARKET (search for similar items in EconPapers)
JEL-codes: C10 C13 E50 E52 E58 (search for similar items in EconPapers)
Pages: 34 pages
Date: 1996
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Citations: View citations in EconPapers (62)

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Related works:
Journal Article: Do Measures of Monetary Policy in a VAR Make Sense? (1998)
Working Paper: Do measures of monetary policy in a VAR make sense? (1996)
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