Working Paper: NBER ID: w9660
Authors: Jon Faust; John H. Rogers; Eric Swanson; Jonathan H. Wright
Abstract: This paper proposes a new approach to identifying the effects of monetary policy shocks in an international vector autoregression. Using high-frequency data on the prices of Fed Funds futures contracts, we measure the impact of the surprise component of the FOMC-day Federal Reserve policy decision on financial variables, such as the exchange rate and the foreign interest rate. We show how this information can be used to achieve identification without having to make the usual strong assumption of a recursive ordering.
Keywords: No keywords provided
JEL Codes: C32; E52; F30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unanticipated changes in the fed funds target rate during FOMC meetings (E52) | exchange rates (F31) |
| unanticipated changes in the fed funds target rate during FOMC meetings (E52) | foreign interest rates (E43) |
| monetary policy shocks (E39) | exchange rates (F31) |
| monetary policy shocks (E39) | foreign output (F29) |
| exchange rates (F31) | foreign interest rates (E43) |
| exchange rates (F31) | foreign output (F29) |
| monetary policy shocks (E39) | movements of exchange rates (F31) |
| monetary policy shocks (E39) | tighter confidence interval for variance share of exchange rate (F31) |