The effect of monetary policy on output in EMU3

Rafiq, Muhammad; Mallick, Sushanta

doi:10.1016/j.jmacro.2007.12.003

Cited by 140 publications

(84 citation statements)

References 35 publications

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“…Researchers need to disentangle this effect, however, from the financial crisis experienced in Europe and the US. Furthermore, this may lead to business cycle de-synchronization Mohsin 2007, 2010 andRafiq andMallick 3 2008) or negatively affect the nexus between monetary and financial stability (Granville and Mallick 2009;Sousa 2010a;and Castro 2011).…”

Section: Introductionmentioning

confidence: 99%

Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience

et al. 2012

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This study assesses how fiscal policy affects the dynamics of asset markets, using Bayesian vector autoregressive models. We use sign restrictions to identify government revenue and government spending shocks, while controlling for generic business cycle and monetary policy shocks. Using South African quarterly data from 1966:Q1 to 2011:Q2, we find that fiscal spending shocks affect stock prices more than house prices. Both spending and revenue shocks affect stock prices whereas only revenue shocks affect house prices.

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Section: Introductionmentioning

confidence: 99%

Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience

et al. 2012

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“…This is because the primary goal of monetary policy is to maintain a stable output gap and inflation. In developed countries, like the United States and major European countries, there is substantial evidence of the effectiveness of monetary policy innovations on real economic parameters, [12], [13], [14], and [15].…”

Section: Related Researchmentioning

confidence: 99%

Fiscal Policy and Monetary Policy: Sensitivity Analysis

Yunanto¹,

Medyawati²

2015

IJTEF

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Abstract-Economic policy focuses on the management of macroeconomic stability, fiscal policy will interact with monetary policy to control macroeconomic balance. The purpose of this study is to analyze the fiscal and monetary policy to gross domestic product. The sensitivity analysis was performed to explain the change of policy shocks on macroeconomic indicators. The analysis method in this research is using error correction model of Engle Granger (ECM-EG), which estimates the short-term and Two Stages Least Square for the long term estimates.

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“…Although the resulting model is set-identified and the approach therefore raises serious robustness concern as we discussed above, the common practice is to consider single-prior Bayesian inference in set-identified SVARs. The large body of the empirical literature adopting this approach includes Canova and Nicolo (2002), Faust (1998), Mountford (2005), Rafiq and Mallick (2008), Scholl and Uhlig (2008), Uhlig (2005), and Vargas-Silva (2008) for applications to monetary policy, Dedola and Neri (2007), Fujita (2011), andPeersman andStraub (2009) for applications to business cycle model, Mountford and Uhlig (2009) for applications to fiscal policy, Kilian and Murphy (2012) for applications to oil prices. Alternative approaches that do not suffer from the pitfalls of single-prior Bayesian inference are Moon, Schorfheide, and Granziera (2013) and Gafarov, Meier, and Montiel-Olea (2016a,b), who consider frequentist inference for the identified set and Giacomini and Kitagawa (2015), who propose a robust Bayesian approach.…”

Section: Introductionmentioning

confidence: 99%

Uncertain identification

Volpicella¹,

Kitagawa²

2017

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Uncertainty about the choice of identifying assumptions is common in causal studies, but is often ignored in empirical practice. This paper considers uncertainty over models that impose different identifying assumptions, which, in general, leads to a mix of point-and set-identified models. We propose performing inference in the presence of such uncertainty by generalizing Bayesian model averaging. The method considers multiple posteriors for the set-identified models and combines them with a single posterior for models that are either point-identified or that impose non-dogmatic assumptions. The output is a set of posteriors (post-averaging ambiguous belief ) that are mixtures of the single posterior and any element of the class of multiple posteriors, with weights equal to the posterior model probabilities. We suggest reporting the range of posterior means and the associated credible region in practice, and provide a simple algorithm to compute them. We establish that the prior model probabilities are updated when the models are "distinguishable" and/or they specify different priors for reduced-form parameters, and characterize the asymptotic behavior of the posterior model probabilities. The method provides a formal framework for conducting sensitivity analysis of empirical findings to the choice of identifying assumptions. In a standard monetary model, for example, we show that, in order to support a negative response of output to a contractionary monetary policy shock, one would need to attach a prior probability greater than 0.32 to the validity of the assumption that prices do not react contemporaneously to such a shock.

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The effect of monetary policy on output in EMU3

Cited by 140 publications

References 35 publications

Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience

Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience

Fiscal Policy and Monetary Policy: Sensitivity Analysis

Uncertain identification

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