The dynamic effects of monetary policy shocks

: a better identification assumption for SVAR

Abstract

In this study, I use structural vector autoregressive (SVAR) models to examine the dynamic effects of monetary policy shocks. The impulse response functions from the SVAR models are matched with those generated by the dynamic New Keynesian model by changing relevant structural parameters. The weighted distance between the SVAR impulse response functions and the theoretical impulse response functions is minimized to obtain the estimates of the structural parameters. Distances corresponding to different identification schemes are measured, and the main result is that the distance would be smaller when long-run and short-run identification assumptions are jointly implemented. Thus, theoretical models match better with the SVAR models with mixed identification schemes. Consequently, mixed identification schemes perform better than traditionally used short-run recursive identification.

Date of Award	2 Oct 2015
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Yong WANG (Supervisor)