Nonconventional Monetary Policy in a Regime-Switching Model with Endogenous Financial Crises

2018 ◽  
Author(s):  
Leonardo Barreto
Keyword(s):  
Monetary Policy ◽  
Financial Crises ◽  
Regime Switching ◽  
Regime Switching Model ◽  
Switching Model

scholarly journals Were There Regime Switches in U.S. Monetary Policy?

2006 ◽  
Vol 96 (1) ◽  
pp. 54-81 ◽  
Author(s):  
Christopher A Sims ◽  
Tao Zha
Keyword(s):  
Monetary Policy ◽  
Time Variation ◽  
Regime Switching ◽  
Policy Rule ◽  
Regime Switching Model ◽  
Switching Model ◽  
Monetary Targeting ◽  
Monetary Policy Rule ◽  
Best Fit

A multivariate regime-switching model for monetary policy is confronted with U.S. data. The best fit allows time variation in disturbance variances only. With coefficients allowed to change, the best fit is with change only in the monetary policy rule and there are three estimated regimes corresponding roughly to periods when most observers believe that monetary policy actually differed. But the differences among regimes are not large enough to account for the rise, then decline, in inflation of the 1970s and 1980s. Our estimates imply monetary targeting was central in the early 1980s, but also important sporadically in the 1970s.

scholarly journals Crisis risk prediction with concavity from Polymodel

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Yao Kuang ◽  
Raphael Douady
Keyword(s):  
Financial Crises ◽  
Regime Switching ◽  
Risk Measures ◽  
Mixture Distributions ◽  
Risk Indicator ◽  
Normal Mixture ◽  
Regime Switching Model ◽  
Switching Model ◽  
The Past ◽  
Important Research Topic

<p style='text-indent:20px;'>Financial crises are an important research topic because of their impact on the economy, businesses, and populations. However, prior research tends to generate reactive systemic risk measures, in the sense that the measure surges after the crisis starts. Few of them succeed in warning of financial crises in advance. In this paper, we first sketch a toy model that produces normal mixture distributions based on a dynamic regime switching model. We derive that the relative concavity among various indices tends to increase before a crisis. Using Polymodel theory, we introduce a measure of concavity as a crisis risk indicator, and test it against known crises observed in the past. We validate this indicator by a trading strategy holding long or short positions on the S &amp; P 500 Index, depending on the indicator value.</p>

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