Assessing the Transmission of Monetary Policy Shocks Using Dynamic Factor Models

Dimitris Korobilis

Working Paper series from Rimini Centre for Economic Analysis

Abstract: This paper extends the current literature which questions the stability of the monetary transmission mechanism, by using a Dynamic Factor Model with time-varying parameters, which allows fast and efficient inference based on hundreds of explanatory variables. Different specifications are compared where the factor loadings, VAR coefficients and error covariances may change gradually in every period or be subject to small breaks. The model is applied to 157 post-World War II U.S. quarterly macroeconomic variables. The most notable changes were in the responses of real activity measures, prices and monetary aggregates, while other key indicators of the economy remained relatively unaffected.

Keywords: Structural FAVAR; time varying parameter model; monetary policy (search for similar items in EconPapers)
JEL-codes: C11 C32 E52 (search for similar items in EconPapers)
Date: 2009-01
References: Add references at CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://www.rcea.org/RePEc/pdf/wp35_09.pdf

Related works:
Journal Article: Assessing the Transmission of Monetary Policy Using Time-varying Parameter Dynamic Factor Models-super- (2013)
Working Paper: Assessing the transmission of monetary policy using dynamic factor models (2010)
Working Paper: Assessing the Transmission of Monetary Policy Shocks Using Dynamic Factor Models (2009)
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:rim:rimwps:35_09

Access Statistics for this paper

More papers in Working Paper series from Rimini Centre for Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Marco Savioli ().