EconPapers    
Economics at your fingertips  
 

Measuring Monetary Policy

Ben Bernanke and Ilian Mihov ()

No 10, Economics Series from Institute for Advanced Studies

Abstract: Extending the approach of Bernanke and Blinder (1992), Strongin (1992), and Christiano, Eichenbaum, and Evans (1994a, 1994b), we develop and apply a VAR-based methodology for measuring the stance of monetary policy. More specifically, we develop a "semi-structural" VAR approach, which extracts information about monetary policy from data on bank reserves and the federal funds rate but leaves the relationships among the macroeconomic variables in the system unrestricted. The methodology nests earlier VAR-based measures and can be used to compare and evaluate these indicators. It can also be used to construct measures of the stance of policy that optimally incorporate estimates of the Fed's operating procedure for any given period. Among existing approaches, we find that innovations to the federal funds rate (Bernanke-Blinder) are a good measure of policy innovations during the periods 1965-79 and 1988-94; for the period 1979-94 as a whole, innovations to the component of nonborrowed reserves that is orthogonal to total reserves (Strongin) seems to be the best choice. We develop a new measure of policy stance that conforms well to qualitative indicators of policy such as the Boschen-Mills (1991) index. Innovations to our measure lead to reasonable and precisely estimated dynamic responses by variables such as real GDP and the GDP deflator.

Keywords: Monetary Policy; Monetary Policy Stance; Semi-Structural VAR Approach (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Pages: 45 pages
Date: 1995-06
References: Add references at CitEc
Citations: View citations in EconPapers (143) Track citations by RSS feed

Downloads: (external link)
http://www.ihs.ac.at/publications/eco/es-10.pdf First version, 1995 (application/pdf)

Related works:
Journal Article: Measuring Monetary Policy (1998) Downloads
Working Paper: Measuring monetary policy (1995)
Working Paper: Measuring Monetary Policy (1995) Downloads
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:ihs:ihsesp:10

Ordering information: This working paper can be ordered from
Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria

Access Statistics for this paper

More papers in Economics Series from Institute for Advanced Studies Josefstädterstr. 39, A-1080 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Doris Szoncsitz ().

 
Page updated 2021-05-17
Handle: RePEc:ihs:ihsesp:10