Risk aversion, uncertainty, and monetary policy: Structural vector autoregressions identified with high-frequency external instruments
Woon Wook Jang
Economics Letters, 2020, vol. 186, issue C
This study uses structural vector autoregression models to examine the monetary policy (MP) effects on risk aversion, uncertainty, and inflation. MP shocks are identified with high-frequency external instruments, rather than Cholesky decomposition. The instruments include asset price changes in the 30-minute window around FOMC announcements and their decomposition into three orthogonal factors. The impulse-response analysis results are consistent with the standard MP effects theory, unlike with the Cholesky decomposition method.
Keywords: Risk aversion; Uncertainty; Monetary policy; Structural vector autoregression; High-frequency data (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 E58 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519303374
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