The Systematic Component of Monetary Policy in SVARs: An Agnostic Identi

Rubio-Ramírez, Juan Francisco, Dario Caldara and Jonas E. Arias
Authors registered in the RePEc Author Service: Juan F Rubio-Ramirez

No 11674, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the effects of monetary policy shocks using structural VARs. We achieve identi cation by imposing sign and zero restrictions on the systematic component of monetary policy. We consistently find that an increase in the fed funds rate induces a contraction in output. We also show that the identi cation strategy in Uhlig (2005), which imposes sign restrictions on the impulse responses to a monetary shock, does not satisfy our restrictions on the systematic component of monetary policy with high posterior probability. This finding accounts for the difference in results with Uhlig (2005), who found that contractionary monetary policy shocks have no clear effect on output. When we reconcile the two approaches by combining both sets of restrictions, monetary policy shocks remain contractionary.

Date: 2016-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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