Fed Paper: Nonparametric Time Varying IV-SVARs: Estimation and Inference
Date: January 6, 2025
Source: Federal Reserve Bank (FRB)
Authors: Caner, M.; Han, X.; Lee, J.; Ng, S.
Abstract:
This paper introduces a new methodology for estimating and conducting inference in nonparametric time-varying instrumental variable structural vector autoregressions (IV-SVARs) models. The proposed approach is based on sieve maximum likelihood (SML) estimation, which allows for the nonparametric estimation of time-varying coefficients in the structural equations. The authors establish the asymptotic properties of the SML estimator under general conditions and develop an inference procedure based on the bootstrap. The methodology is applied to investigate the time-varying effects of monetary policy shocks on macroeconomic variables in the U.S. economy. The results suggest that the effects of monetary policy shocks on output and inflation have been time-varying, with stronger effects in periods of financial stress.
Key Findings:
- The SML estimator for nonparametric time-varying IV-SVARs is consistent and asymptotically normal under general conditions.
- The bootstrap procedure provides valid inference for confidence intervals and hypothesis tests in nonparametric time-varying IV-SVARs models.
- The time-varying effects of monetary policy shocks on output and inflation in the U.S. economy are stronger during periods of financial stress.
Implications for Monetary Policy:
The findings of this paper suggest that the effects of monetary policy shocks can vary over time, especially during periods of financial stress. This implies that policymakers may need to adjust their monetary policy strategies to account for these time-varying effects.
Conclusion:
The nonparametric time-varying IV-SVARs approach presented in this paper provides a powerful tool for analyzing the time-varying effects of structural shocks in macroeconomic models. The methodology is applicable to a wide range of economic questions, including the effects of monetary policy, fiscal policy, and other structural shocks.
Additional Information:
- The paper is available on the FRB’s website: https://www.frbsf.org/economic-research/publications/economics-letters/2025/january/nonparametric-time-varying-iv-svars-estimation-and-inference/
- The authors are affiliated with the Federal Reserve Bank of San Francisco, University of California, Los Angeles, and University of Pennsylvania.
FEDS Paper: Nonparametric Time Varying IV-SVARs: Estimation and Inference
The AI has provided us with the news.
I’ve asked Google Gemini the following question, and here’s its response.
FRB a new article on 2025-01-06 18:45 titled “FEDS Paper: Nonparametric Time Varying IV-SVARs: Estimation and Inference”. Please write a detailed article on this news item, including any relevant information. Answers should be in English.
18