Data Revisions and the Identification of Monetary Policy Shocks
33 Pages Posted: 23 Jun 2003
Date Written: January 2003
Monetary policy research using time series methods has been criticized for using more information than the Federal Reserve had available in setting policy. To quantify the role of this criticism, we propose a method to estimate a VAR with real-time data while accounting for the latent nature of many economic variables, such as output. Our estimated monetary policy shocks are closely correlated with a typically estimated measure. The impulse response functions are broadly similar across the methods. Our evidence suggests that the use of revised data in VAR analyses of monetary policy shocks may not be a serious limitation.
Keywords: monetary policy shocks, real-time data
JEL Classification: E52, C32
Suggested Citation: Suggested Citation