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Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure
Jonas E. Arias
Dario Caldara
Juan F. Rubio-Ramirez
Abstract

Following Leeper, Sims, and Zha (1996), we identify monetary policy shocks in SVARs by restricting the systematic component of monetary policy. In particular, we impose sign and zero restrictions only on the monetary policy equation. Since we do not restrict the response of output to a monetary policy shock, we are agnostic in Uhlig's (2005) sense. But, in contrast to Uhlig (2005), our results support the conventional view that a monetary policy shock leads to a decline in output. Hence, our results show that the contractionary effects of monetary policy shocks do not hinge on questionable exclusion restrictions.


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Jonas E. Arias & Dario Caldara & Juan F. Rubio-Ramirez, The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1131, 12 Mar 2015.
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Keywords: SVARs; Monetary policy shocks; Systematic component of monetary policy
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