The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure

44 Pages Posted: 25 Apr 2015

See all articles by Jonas Arias

Jonas Arias

Federal Reserve Bank of Philadelphia

Dario Caldara

Board of Governors of the Federal Reserve System

Juan Francisco Rubio-Ramirez

Federal Reserve Bank of Atlanta - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: March 13, 2015

Abstract

Following Leeper, Sims, and Zha (1996), we identify monetary policy shocks in SVARs by restricting the systematic component of monetary policy. In particular, we impose sign and zero restrictions only on the monetary policy equation. Since we do not restrict the response of output to a monetary policy shock, we are agnostic in Uhlig's (2005) sense. But, in contrast to Uhlig (2005), our results support the conventional view that a monetary policy shock leads to a decline in output. Hence, our results show that the contractionary effects of monetary policy shocks do not hinge on questionable exclusion restrictions.

Keywords: SVARs; Monetary policy shocks; Systematic component of monetary policy

JEL Classification: E52; C51

Suggested Citation

Arias, Jonas and Caldara, Dario and Rubio-Ramirez, Juan Francisco, The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure (March 13, 2015). FRB International Finance Discussion Paper No. 1131. Available at SSRN: https://ssrn.com/abstract=2598244 or http://dx.doi.org/10.2139/ssrn.2598244

Jonas Arias (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

10 N Independence Mall W
Philadelphia, PA 19106
United States

Dario Caldara

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Juan Francisco Rubio-Ramirez

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8057 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.econ.umn.edu/~rubio

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