Identifying Monetary Policy Shocks via Changes in Volatility

Markku Lanne and Helmut Lütkepohl

No 1744, CESifo Working Paper Series from CESifo

Abstract: A central issue of monetary policy analysis is the specification of monetary policy shocks. In a structural vector autoregressive setting there has been some controversy about which restrictions to use for identifying the shocks because standard theories do not provide enough information to fully identify monetary policy shocks. In fact, to compare different theories it would even be desirable to have over-identifying restrictions which would make statistical tests of different theories possible. It is pointed out that some progress towards overidentifying monetary policy shocks can be made by using specific data properties. In particular, it is shown that changes in the volatility of the shocks can be used for identification. Based on monthly US data from 1965-1996 different theories are tested and it is found that associating monetary policy shocks with shocks to nonborrowed reserves leads to a particularly strong rejection of the model whereas assuming that the Fed accommodates demand shocks to total reserves cannot be rejected.

Keywords: monetary policy; structural vector autoregressive analysis; vector autoregressive process; impulse responses (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp1744.pdf (application/pdf)

Related works:
Journal Article: Identifying Monetary Policy Shocks via Changes in Volatility (2008)
Journal Article: Identifying Monetary Policy Shocks via Changes in Volatility (2008)
Working Paper: Identifying Monetary Policy Shocks via Changes in Volatility (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1744

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().