Measuring the impact of unconventional monetary policy on the US business cycle
Florian Huber and
Working Papers in Regional Science from WU Vienna University of Economics and Business
The paper estimates a dynamic macroeconometric model for the US economy that captures two important features commonly observed in the study of the US business cycle, namely the strong co-movement of key macroeconomic quantities, and the distinction between expansionary and recessionary phases. The model extends the factor-augmented vector autoregressive model of Bernanke et al. (2005) by combining Markov switching with factor augmentation, modeling the Markov switching probabilities endogenously, and adopting a full Bayesian estimation approach which uses shrinkage priors for several parts of the parameter space. Exploiting a large data set for the US economy ranging from 1971:Q1 to 2014:Q2, the model is applied to measure not only the dynamic effects of unconventional monetary policy within distinct stages of the business cycle, but also the dynamic response of the recession probabilities, based on conducting counterfactual simulations. The results obtained provide new insights on the effect of monetary policy under changing business cycle phases, and highlight the importance of discriminating between expansionary and recessionary phases of the business cycle when analyzing the impact of monetary policy on the macroeconomy. (authors' abstract)
Keywords: Non-linear FAVAR; business cycle; monetary policy; structural model; US economy (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://epub.wu.ac.at/4543/ original version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wiw:wus046:4543
Access Statistics for this paper
More papers in Working Papers in Regional Science from WU Vienna University of Economics and Business Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by WU Library ().