publication . Report . Article . Preprint . Other literature type . 2005

Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach

Ben S. Bernanke; Jean Boivin; Piotr Eliasz;
Open Access
  • Published: 01 Feb 2005
  • Publisher: National Bureau of Economic Research
Abstract
Structural vector autoregressions (VARs) are widely used to trace out the effect of monetary policy innovations on the economy. However, the sparse information sets typically used in these empirical models lead to at least two potential problems with the results. First, to the extent that central banks and the private sector have information not reflected in the VAR, the measurement of policy innovations is likely to be contaminated. A second problem is that impulse responses can be observed only for the included variables, which generally constitute only a small subset of the variables that the researcher and policymaker care about. In this paper we investigate...
Subjects
free text keywords: Vector autoregression ; Monetary policy, Economics and Econometrics, Microeconomics, Macroeconomics, Private sector, Vector autoregression, Empirical modelling, Information problem, Autoregressive model, Monetary policy, Exploit, Monetary transmission mechanism, Economics, jel:E3, jel:E4

Zha, 1998; Cochrane, 1996; Bernanke, Gertler, and Watson, 1997). Rudebusch, Glenn, “Do Measures of Monetary Policy in a VAR Make Sense?”, International Economic Review 39, November 1998, 907-31.

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