Measurement Errors and Monetary Policy: Then and Now

37 Pages Posted: 30 Nov 2015

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

Goethe University Frankfurt

Date Written: 2015-11-05

Abstract

Should policymakers and applied macroeconomists worry about the difference between real-time and final data? We tackle this question by using a VAR with time-varying parameters and stochastic volatility to show that the distinction between real-time data and final data matters for the impact of monetary policy shocks: The impact on final data is substantially and systematically different (in particular, larger in magnitude for different measures of real activity) from the impact on real-time data. These differences have persisted over the last 40 years and should be taken into account when conducting or studying monetary policy.

Keywords: real-time data, time-varying parameters, stochastic volatility, impulse responses

Suggested Citation

Amir-Ahmadi, Pooyan and Matthes, Christian and Wang, Mu-Chun, Measurement Errors and Monetary Policy: Then and Now (2015-11-05). FRB Richmond Working Paper No. 15-13. Available at SSRN: https://ssrn.com/abstract=2696384

Pooyan Amir-Ahmadi (Contact Author)

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

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

Christian Matthes

Federal Reserve Bank of Richmond ( email )

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

Mu-Chun Wang

Goethe University Frankfurt ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

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