Measuring monetary policy shocks

Marc Burri and Daniel Kaufmann

No 24-03, IRENE Working Papers from IRENE Institute of Economic Research

Abstract: We propose a two-step approach to measure monetary policy shocks based on daily financial market data. First, we estimate the causal impact of a monetary policy shock on financial market variables using standard instrumental variables techniques (high-frequency and heteroskedasticity-based identification). Second, we exploit the cross-sectional variation of the causal impact to predict the underlying unobserved monetary policy shocks based on the Kalman filter. The two-step approach delivers a more accurate measure of monetary policy shocks. As a consequence, various anomalies documented in the literature on measuring monetary policy shocks are alleviated or resolved.

Keywords: Monetary policy shocks; high-frequency identification; identification through heteroskedasticity; instrumental variables; weak-instrument problem; Kalman filter (search for similar items in EconPapers)
JEL-codes: C3 E3 E4 E5 (search for similar items in EconPapers)
Pages: 55 pages.
Date: 2024-08
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-inv and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www5.unine.ch/RePEc/ftp/irn/pdfs/WP24-03.pdf (application/pdf)

Related works:
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:irn:wpaper:24-03

Access Statistics for this paper

More papers in IRENE Working Papers from IRENE Institute of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Siwar Khelifa ().