Arbeitspapier

(Almost) recursive identification of monetary policy shocks with economic parameter restrictions

Recursively identified vector autoregressive (VAR) models often lead to a counterintuitive response of prices (and output) shortly after a monetary policy shock. To overcome this problem, we propose to estimate the VAR parameters under the restriction that economic theory is not violated, while the shocks are still recursively identified. We solve this optimization problem under non-linear constraints using an augmented Lagrange solution approach, which adjusts the VAR coefficients to meet the theoretical requirements. In a generalization, we allow for a (minimal) rotation of the Cholesky matrix in addition to the parameter restrictions. Based on a Monte Carlo study and an empirical application, we show that particularly the "almost recursively identified approach with parameter restrictions" leads to a solution that avoids an estimation bias, generates theory-consistent impulse responses, and is as close as possible to the recursive scheme.

Sprache
Englisch

Erschienen in
Series: Research Papers in Economics ; No. 1/23

Klassifikation
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Monetary Policy
Central Banks and Their Policies
Thema
Monetary Policy Transmission
Non-Linear Optimization
Price Puzzle
Recursive Identification
Rotation
Sign Restrictions

Ereignis
Geistige Schöpfung
(wer)
Burgard, Jan Pablo
Neuenkirch, Matthias
Umlandt, Dennis
Ereignis
Veröffentlichung
(wer)
Universität Trier, Fachbereich IV - Volkswirtschaftslehre
(wo)
Trier
(wann)
2023

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Burgard, Jan Pablo
  • Neuenkirch, Matthias
  • Umlandt, Dennis
  • Universität Trier, Fachbereich IV - Volkswirtschaftslehre

Entstanden

  • 2023

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