Measuring the Effects of a Shock to Monetary Policy - Humboldt ...

Bayesian FAVARs with Agnostic Identification 51
9 Summary and Concluding Remarks
In this thesis I combined the likelihood-based estimation of the FAVAR framework with
the agnostic identification scheme to estimate the effects of a shock to monetary policy
imposing sign restriction on the impulses responses on prices, nonborrowed reserves and
the federal funds rate. Furthermore some combinations of restrictions on more than one
monetary aggregate and price was tried out. I stay agnostic w.r.t. the output variables.
The results seem produce results that appear to be more reasonable and more accurate
than with standard identification schemes as provided by BBE. The accuracy increases
with the increasing restrictions, however the number of accepted responses according to
the agnostic identification decreases sharply.
I suggest to be more strict with the restriction to set in so far that one imposes not only
single variables but several variables such as prices to react according to the conventional
wisdom. This should serve the possibility to narrow down the space of reasonable reactions
that are merely according to a shock to monetary policy. Price and monetary aggregates
show reasonable responses after a monetary policy shock.
10 Matlab Implementation
This part is supposed to explain the attached Matlab code. The code uses some codes
written by Christopher Sims. I furthermore used some codes written by Piotr Eliasz and
Jean Boivin. The part on the Gibbs sampling and Kalman filtering, in parts draws on the
code written by Piotr Eliasz. Also some codes written by Bartosz Maćkowiak provided
for the course ”Empirical Macroeconomics” have been also a great help. All the codes
used by others are in an seperated folder in the attached cd-rom.