Empirical Analysis of Policy Interventions

Eric Leeper and Tao Zha

No 9063, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We construct linear projections of macro variables conditional on hypothetical paths of monetary policy, using as an example an identified VAR model. Hypothetical policies are restricted to ones where both the policy intervention and its impacts are consistent with history -- otherwise the linear projections are likely to be unreliable. We use the approach to interpret Federal Reserve decisions, modeling their frequent reassessment in light of new information about the tradeoffs policymakers face. The interventions we consider matter: they can shift projected paths and probability distributions of macro variables in economically meaningful ways.

JEL-codes: E47 E52 (search for similar items in EconPapers)
Date: 2002-07
Note: EFG ME
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Citations: View citations in EconPapers (18)

Published as Eric Leeper & Tao Zha, 2002. "Empirical analysis of policy interventions," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.

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