Under the same (Chole)sky: DNK models, timing restrictions and recursive identification of monetary policy shocks

2016 ◽

Vol 16 (1) ◽

Cited By ~ 6

Author(s):

Takeshi Kimura ◽

Jouchi Nakajima

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Regime Switching ◽

Structural Var ◽

Var Model ◽

Recursive Identification ◽

Time Varying ◽

Unconventional Monetary Policy ◽

Monetary Policy Shocks ◽

Policy Shocks

AbstractThis paper proposes a new estimation framework for identifying monetary policy shocks in both conventional and unconventional policy regimes using a structural VAR model. Exploiting a latent threshold modeling strategy that induces time-varying shrinkage of the parameters, we explore a recursive identification switching with a time-varying overidentification for the interest rate zero lower bound. We empirically analyze Japan’s monetary policy to illustrate the proposed approach for modeling regime-switching between conventional and unconventional monetary policy periods, and find that the proposed model is preferred over a nested standard time-varying parameter VAR model. The estimation results show that increasing bank reserves lowers long-term interest rates in the unconventional policy periods, and that the impulse responses of inflation and the output gap to a bank reserve shock appear to be positive but highly uncertain.

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On the effects of monetary policy in Russia: The role of the space of spanned shocks and the policy regime shifts

Voprosy Ekonomiki ◽

10.32609/0042-8736-2018-2-33-55 ◽

2018 ◽

pp. 33-55 ◽

Cited By ~ 4

Author(s):

A. A. Pestova

Keyword(s):

Monetary Policy ◽

Policy Instruments ◽

Recursive Identification ◽

Monetary Shocks ◽

Monetary Policy Shocks ◽

Vector Autoregressions ◽

Policy Regime ◽

Relative Contribution ◽

Policy Shocks ◽

Effect Of Monetary Policy

This paper investigates the influence of monetary policy shocks in Russia on the basic macroeconomic and financial indicators. To identify the shocks of monetary policy, the Bayesian approach to the estimation of vector autoregressions (VARs) is applied, followed by extraction of the unexplained dynamics of monetary policy instruments (shocks) using both recursive identification and sign restrictions approach. The estimates show that the monetary policy shocks, apparently, cannot be attributed to the key drivers of cyclical movements in Russia, as they explain only less than 10% of the output variation and from 5 to10% of the prices variation. When applying recursive identification, no restraining effect of monetary policy on prices is found. Respective impact on output is negative and statistically significant in all identification procedures employed; however, the relative contribution of monetary shocks to output is not large. In addition, no significant effect of monetary policy tightening on the stabilization of the ruble exchange rate was found.

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