Chauvet, Marcelle and Tierney, Heather L. R. (2007): Real Time Changes in Monetary Policy.

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Abstract
This paper investigates potential changes in monetary policy over the last decades using a nonparametric vector autoregression model. In the proposed model, the conditional mean and variance are timedependent and estimated using a nonparametric local linear method, which allows for different forms of nonlinearity, conditional heteroskedasticity, and nonnormality. Our results suggest that there have been gradual and abrupt changes in the variances of shocks, in the monetary transmission mechanism, and in the Fed’s reaction function. The response of output was strongest during Volcker’s disinflationary period and has since been slowly decreasing over time. There have been some abrupt changes in the response of inflation, especially in the early 1980s, but we can not conclude that it is weaker now than in previous periods. Finally, we find significant evidence that policy was passive during some parts of Burn’s period, and active during Volcker’s disinflationary period and Greenspan’s period. However, we find that the uncovered behavior of the parameters is more complex than general conclusions suggest, since they display considerable nonlinearities over time. A particular appeal of the recursive estimation of the proposed VARARCH is the detection of discrete local deviations as well as more gradual ones, without smoothing the timing or magnitude of the changes.
Item Type:  MPRA Paper 

Original Title:  Real Time Changes in Monetary Policy 
Language:  English 
Keywords:  Monetary Policy, Taylor Rule, Local Estimation, Nonlinearity, Nonparametric, Monetary Policy; Taylor Rule; Local Estimation; Nonlinearity; Nonparametric; Structural Vector Autoregression; Autoregressive Conditional Heteroskedasticity; 
Subjects:  E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E58  Central Banks and Their Policies E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E52  Monetary Policy E  Macroeconomics and Monetary Economics > E4  Money and Interest Rates > E40  General 
Item ID:  16199 
Depositing User:  Marcelle Chauvet 
Date Deposited:  13. Jul 2009 12:52 
Last Modified:  19. May 2015 10:18 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/16199 