TY - JOUR
T1 - On the evolution of the monetary policy transmission mechanism
AU - Koop, G.M.
AU - Leon-Gonzalez, R.
AU - Strachan, R.
PY - 2009/4
Y1 - 2009/4
N2 - This paper investigates whether the monetary transmission mechanism has changed or whether apparent changes are due to changes in the volatility of exogenous shocks. Also, the question of whether any changes have been gradual or abrupt is considered. A mixture innovation model is used which extends the class of time-varying vector autoregressive models with stochastic volatility. The advantage of our extension is that it allows us to estimate whether, where, when and how parameter change is occurring. Our empirical results indicate that the transmission mechanism, the volatility of exogenous shocks and the correlations between exogenous shocks are all changing.
AB - This paper investigates whether the monetary transmission mechanism has changed or whether apparent changes are due to changes in the volatility of exogenous shocks. Also, the question of whether any changes have been gradual or abrupt is considered. A mixture innovation model is used which extends the class of time-varying vector autoregressive models with stochastic volatility. The advantage of our extension is that it allows us to estimate whether, where, when and how parameter change is occurring. Our empirical results indicate that the transmission mechanism, the volatility of exogenous shocks and the correlations between exogenous shocks are all changing.
KW - structural VAR
KW - monetary policy
KW - Bayesian
KW - mixture innovation model
KW - time-varying parameter model
UR - http://www.elsevier.com/wps/find/journaldescription.cws_home/505547/description#description
UR - http://dx.doi.org/10.1016/j.jedc.2008.11.003
U2 - 10.1016/j.jedc.2008.11.003
DO - 10.1016/j.jedc.2008.11.003
M3 - Article
VL - 33
SP - 997
EP - 1017
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
SN - 0165-1889
IS - 4
ER -