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

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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.
52 Bayesian FAVARs with Agnostic Identification BAYESIAN_FAVAR.m The main Script. After setting the global GLOG_MODE (see description of function GLOG) the functions DO_INPUT, DO_CALCULATION and DO_RESULTS are called. The output of each function is given to the following functions as their input parameter. DO_IMPORTgenerates a structure called input (see description of the used data structure in the attached cd- rom), which contains information about user entries to choose a set of presets and spec- ification data. This structure is passed to the DO_CALCULATION function as its input. In DO_CALCULATION the structure results is created, which contains the results of the calculation process. DO_RESULTS uses this two data structures to present the results to the user. DO_INPUT.m This function returns the input data structure to the main function. To separate dif- ferent sources and groups of input information, the DO_INPUT function is separated into subfunctions, where each returns one part of the input structure.
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