Decomposing the Effects of Monetary Policy Using an External Instruments SVAR
Aeimit Lakdawala
MPRA Paper from University Library of Munich, Germany
Abstract:
We study the effects of monetary policy on economic activity separately identifying the effects of a conventional change in the fed funds rate from the policy of forward guidance. We use a structural VAR identified using external instruments from futures market data. The response of output to a fed funds rate shock is found to be consistent with typical monetary VAR analyses. However, the effect of a forward guidance shock that increases long-term interest rates has an expansionary effect on output. This counterintuitive response is shown to be tied to the asymmetric information between the Federal Reserve and the public.
Keywords: Monetary policy; Forward Guidance; Identification with External Instruments (search for similar items in EconPapers)
JEL-codes: E31 E32 E43 E52 E58 (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (7)
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https://mpra.ub.uni-muenchen.de/78254/1/MPRA_paper_78254.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/80306/1/MPRA_paper_78254.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/80306/8/MPRA_paper_80306.pdf revised version (application/pdf)
Related works:
Journal Article: Decomposing the effects of monetary policy using an external instruments SVAR (2019) 
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:78254
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