Multiple monetary policy shocks from daily data: A heteroskedasticity IV approach

Marc Burri and Daniel Kaufmann

No 26-06, IRENE Working Papers from IRENE Institute of Economic Research

Abstract: We extend the heteroskedasticity IV estimator of Rigobon and Sack (2004) from one to multiple monetary policy shocks by imposing recursive zero restrictions on the impact matrix. Unlike high-frequency identification, the approach requires neither intraday tick data nor precise announcement timestamps, making it applicable to countries or historical periods where such data are unavailable. Applied to US FOMC announcements, we find causal effects similar to those of high-frequency identification. The heteroskedasticity-based instrument passes weak-instrument tests for the target shock, whereas high-frequency surprises fail. For the path shock, we also find strong heteroskedasticity-based instruments in key specifications, and we show that the underlying shocks are similar to those based on high-frequency identification.

Keywords: Monetary policy shocks; causal effects; forward guidance; heteroskedasticity; high-frequency; instrumental variables (search for similar items in EconPapers)
JEL-codes: C3 E3 E4 E5 (search for similar items in EconPapers)
Pages: 26 pages.
Date: 2026-04
New Economics Papers: this item is included in nep-ets and nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:irn:wpaper:26-06

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