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Drifts and volatilities under measurement error: Assessing monetary policy shocks over the last century

Pooyan Amir‐Ahmadi, Christian Matthes and Mu-Chun Wang
Authors registered in the RePEc Author Service: Pooyan Amir Ahmadi ()

Quantitative Economics, 2016, vol. 7, issue 2, 591-611

Abstract: How much have the dynamics of U.S. time series changed over the last century? Has the evolution of the Federal Reserve as an institution over the 100 years altered the transmission of monetary policy shocks? To tackle these questions, we build a multivariate time series model with time‐varying parameters and stochastic volatility that features measurement errors in observables. We find substantial changes in the structure of the economy. There is also large variation in the impact of monetary policy shocks, but the majority of this variation is driven by changes in exogenous volatility.

Date: 2016
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Handle: RePEc:wly:quante:v:7:y:2016:i:2:p:591-611