{"id":55117,"date":"2023-12-01T18:33:11","date_gmt":"2023-12-01T17:33:11","guid":{"rendered":"https:\/\/www.wifo.ac.at\/publication\/measuring-monetary-policy-with-residual-sign-restrictions-at-known-shock-dates\/"},"modified":"2024-11-18T13:15:02","modified_gmt":"2024-11-18T12:15:02","slug":"measuring-monetary-policy-with-residual-sign-restrictions-at-known-shock-dates","status":"publish","type":"publication","link":"https:\/\/www.wifo.ac.at\/en\/publication\/55117\/","title":{"rendered":"Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates"},"content":{"rendered":"","protected":false},"featured_media":0,"template":"","class_list":["post-55117","publication","type-publication","status-publish","hentry"],"acf":{"subtitle":"","text":"We propose a novel identification strategy to measure monetary policy in a structural VAR. It is based exclusively on known past policy shocks, which are uncovered from high-frequency data, and does not rely on any theoretical a-priori restrictions. Our empirical analysis for the euro area reveals that interest rate decisions of the ECB surprised financial markets at least fifteen times since 1999. This information is used to restrict the sign and magnitude of the structural residuals of the policy rule equation at these shock dates accordingly. In spite of its utmost agnostic nature, this approach achieves strong identification, suggesting that unexpected ECB decisions have an immediate impact on the short-term money market rate, the narrow money stock, commodity prices, consumer prices and the euro-dollar exchange rate, and that real output responds gradually. Our close to assumption-free approach obtains as an outcome what traditional sign restrictions on impulse responses impose as an assumption.","onlinedate":"2020-09-11 12:00:00","lang":"English","publication_series":"","publication_date":"20200901","publication_date_year":"","publication_date_full":false,"publication_num_pages":"36","keywords":"[]","jelcodes":"[]","related_publications":"[\"fa7aa9fa-0ecc-4853-ac39-e9371ab66075\"]","pdf":416174,"zip":null,"link":"","monthly_report":true,"monthly_report_main":false,"monthly_report_volume":"","monthly_report_pages":"","monthly_report_pages_sort":"0","issue":"608","journal":"WIFO Working Papers","publisher":"","invisible":false,"external":false,"embargo_date":"2020-09-11 12:00:00","types":[44410],"research_groups":[3500],"collaboration":"","persons":[3865,4967],"persons_data":"[{\"personId\":3865,\"personName\":\"Stefan Schiman\",\"organisationNames\":[]},{\"personId\":4967,\"personName\":\"Harald Badinger\",\"organisationNames\":[]}]","clients":[],"subclients":[],"partners":[],"topics":[],"host_publication_title":"","host_publication_subtitle":"","place_of_publication":"","host_publication_editors":"[]","type_description":"","output_media":"","chapter":"","article_number":"","citations":"{\"apa\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_apa rendering_contributiontoperiodical rendering_apa rendering_contributiontoperiodical_apa\\\"><span>Schiman, S.<\\\/span><span>, &amp; Badinger, H.<\\\/span> (2020). <span>Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates<\\\/span>. <span><em>WIFO Working Papers<\\\/em><\\\/span>, (608). <a onclick=\\\"window.open(this.href, '_blank','noopener,noreferrer'); return false;\\\" href=\\\"https:\\\/\\\/www.wifo.ac.at\\\/wwa\\\/pubid\\\/66344\\\" class=\\\"link\\\"><span>https:\\\/\\\/www.wifo.ac.at\\\/wwa\\\/pubid\\\/66344<\\\/span><\\\/a><\\\/div>\",\"vancouver\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_vancouver rendering_contributiontoperiodical rendering_vancouver rendering_contributiontoperiodical_vancouver\\\"><span>Schiman S<\\\/span><span>, Badinger H<\\\/span>. <span class=\\\"title\\\"><span>Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates<\\\/span><\\\/span>. <span>WIFO Working Papers<\\\/span>. 2020 Sept;(608).<\\\/div>\",\"bibtex\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_bibtex rendering_contributiontoperiodical rendering_bibtex rendering_contributiontoperiodical_bibtex\\\"><div>@misc{92575feab32346c29ffed69c2f4d75e3,<\\\/div><div>  title    = \\\"Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates\\\",<\\\/div><div>  abstract = \\\"We propose a novel identification strategy to measure monetary policy in a structural VAR. It is based exclusively on known past policy shocks, which are uncovered from high-frequency data, and does not rely on any theoretical a-priori restrictions. Our empirical analysis for the euro area reveals that interest rate decisions of the ECB surprised financial markets at least fifteen times since 1999. This information is used to restrict the sign and magnitude of the structural residuals of the policy rule equation at these shock dates accordingly. In spite of its utmost agnostic nature, this approach achieves strong identification, suggesting that unexpected ECB decisions have an immediate impact on the short-term money market rate, the narrow money stock, commodity prices, consumer prices and the euro-dollar exchange rate, and that real output responds gradually. Our close to assumption-free approach obtains as an outcome what traditional sign restrictions on impulse responses impose as an assumption.\\\",<\\\/div><div>  keywords = \\\"ECB, Monetary Policy, Set Indentification, Structural VAR\\\",<\\\/div><div>  author   = \\\"Stefan Schiman and Harald Badinger\\\",<\\\/div><div>  note     = \\\"Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates\\\",<\\\/div><div>  year     = \\\"2020\\\",<\\\/div><div>  month    = sep,<\\\/div><div>  language = \\\"English\\\",<\\\/div><div>  journal  = \\\"WIFO Working Papers\\\",<\\\/div><p>}<\\\/p><\\\/div>\",\"ris\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_ris rendering_contributiontoperiodical rendering_ris rendering_contributiontoperiodical_ris\\\"><p>TY  - GEN<\\\/p><p>T1  - Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates<\\\/p><p>AU  - Schiman, Stefan<\\\/p><p>AU  - Badinger, Harald<\\\/p><p>N1  - Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates<\\\/p><p>PY  - 2020\\\/9<\\\/p><p>Y1  - 2020\\\/9<\\\/p><p>N2  - We propose a novel identification strategy to measure monetary policy in a structural VAR. It is based exclusively on known past policy shocks, which are uncovered from high-frequency data, and does not rely on any theoretical a-priori restrictions. Our empirical analysis for the euro area reveals that interest rate decisions of the ECB surprised financial markets at least fifteen times since 1999. This information is used to restrict the sign and magnitude of the structural residuals of the policy rule equation at these shock dates accordingly. In spite of its utmost agnostic nature, this approach achieves strong identification, suggesting that unexpected ECB decisions have an immediate impact on the short-term money market rate, the narrow money stock, commodity prices, consumer prices and the euro-dollar exchange rate, and that real output responds gradually. Our close to assumption-free approach obtains as an outcome what traditional sign restrictions on impulse responses impose as an assumption.<\\\/p><p>AB  - We propose a novel identification strategy to measure monetary policy in a structural VAR. It is based exclusively on known past policy shocks, which are uncovered from high-frequency data, and does not rely on any theoretical a-priori restrictions. Our empirical analysis for the euro area reveals that interest rate decisions of the ECB surprised financial markets at least fifteen times since 1999. This information is used to restrict the sign and magnitude of the structural residuals of the policy rule equation at these shock dates accordingly. In spite of its utmost agnostic nature, this approach achieves strong identification, suggesting that unexpected ECB decisions have an immediate impact on the short-term money market rate, the narrow money stock, commodity prices, consumer prices and the euro-dollar exchange rate, and that real output responds gradually. Our close to assumption-free approach obtains as an outcome what traditional sign restrictions on impulse responses impose as an assumption.<\\\/p><p>KW  - ECB<\\\/p><p>KW  -  Monetary Policy<\\\/p><p>KW  -  Set Indentification<\\\/p><p>KW  -  Structural VAR<\\\/p><p>M3  - WIFO series<\\\/p><p>JO  - WIFO Working Papers<\\\/p><p>JF  - WIFO Working Papers<\\\/p><p>ER  - <\\\/p><\\\/div>\"}","scientific_assistance":"[]","scientific_review":"[]","version":"","release_date":null,"expiration_date":null,"surveyor":"","research_assistance":"","edv":"","additional_info_de":"","additional_info_en":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates - WIFO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.wifo.ac.at\/en\/publication\/55117\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.wifo.ac.at\/en\/publication\/55117\/\" \/>\n<meta property=\"og:site_name\" content=\"WIFO\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/WIFOat\/\" \/>\n<meta property=\"article:modified_time\" content=\"2024-11-18T12:15:02+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.wifo.ac.at\/wp-content\/uploads\/2024\/05\/WIFO-Gebaeude-FotoAlexanderMueller-www.alexandermueller.at-IMG_6326-Bearbeitet-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1280\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@WIFOat\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.wifo.ac.at\\\/en\\\/publication\\\/55117\\\/\",\"url\":\"https:\\\/\\\/www.wifo.ac.at\\\/en\\\/publication\\\/55117\\\/\",\"name\":\"Measuring Monetary Policy with Residual Sign Restrictions at Known Shock Dates - 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