Monetary policy misspecification in VAR models

Fabio Canova and Joaquim Pina

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We examine the effects of extracting monetary policy disturbances with semi-structural and structural VARs, using data generated by a limited participation model under partial accommodative and feedback rules. We find that, in general, misspecification is substantial: short run coefficients often have wrong signs; impulse responses and variance decompositions give misleading representations of the dynamics. Explanations for the results and suggestions for macroeconomic practice are provided.

Keywords: General equilibrium; monetary policy; identification; structural VARs (search for similar items in EconPapers)
JEL-codes: C32 C68 E32 E52 (search for similar items in EconPapers)
Date: 1998-10, Revised 1999-09
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mon
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Citations: View citations in EconPapers (82)

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Related works:
Working Paper: Monetary Policy Misspecification in VAR Models (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:420

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