Drifts, Volatilities, and Impulse Responses Over the Last Century

54 Pages Posted: 10 Apr 2014

See all articles by Pooyan Amir-Ahmadi

Pooyan Amir-Ahmadi

University of Illinois at Urbana-Champaign - Department of Economics

Christian Matthes

Federal Reserve Bank of Richmond

Mu‐Chun Wang

University of Hamburg - Faculty of Economics and Business Administration

Date Written: April 7, 2014

Abstract

How much have the dynamics of U.S. time series and in particular the transmission of innovations to monetary policy instruments changed over the last century? The answers to these questions that this paper gives are "a lot" and "probably less than you think," respectively. We use vector autoregressions with time-varying parameters and stochastic volatility to tackle these questions. In our analysis we use variables that both influenced monetary policy and in turn were influenced by monetary policy itself, including bond market data (the difference between long-term and short-term nominal interest rates) and the growth rate of money.

Keywords: Bayesian VAR, Time variation, U.S. monetary policy

JEL Classification: C50, E31, N12

Suggested Citation

Amir-Ahmadi, Pooyan and Matthes, Christian and Wang, Mu‐Chun, Drifts, Volatilities, and Impulse Responses Over the Last Century (April 7, 2014). Richmond Fed Working Paper No. 14-10. Available at SSRN: https://ssrn.com/abstract=2422918 or http://dx.doi.org/10.2139/ssrn.2422918

Pooyan Amir-Ahmadi

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

Christian Matthes (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Mu‐Chun Wang

University of Hamburg - Faculty of Economics and Business Administration ( email )

Von-Melle-Park 5
Hamburg, 20146
Germany

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