New Evidence on the Puzzles. Results from Agnostic Identification on Monetary Policy and Exchange Rates.

6.2 Specifications

The following VAR specifications have been used:

EE (Eichenbaum-Evans): y, y*, p, nbrx, i, i*, s

GR (Grilli-Roubini): y, y*, p, p*, i, i*, y

BIG (big VAR specification:) y, y^* , p, p^* , m, m^* , nbrx, i, i^* , r, r^* , s

6.3 Identifications in the Literature

The following is a short description of some of the identifications used in the
literature

Eichenbaum-Evans: Eichenbaum and Evans assume the recursive ordering
[y, p, y^* , i^* , nbrx, i, s]. A US monetary policy contraction is identified
with a fall in nbrx.

Grilli-Roubini: Grilli and Roubini assume a recursive ordering [y^* , p^* , y, p, i, i^* , s].
A foreign monetary policy contraction is identified with a rise in the
foreign short term interest rate.

Faust-Rogers: Faust and Rogers consider the EE specification and analyze
the impact of a monetary innovation. Two sets of restrictions are as-
sumed. The first set consists of money restrictions: on impact p, y, y^* ,
nbrx, s are larger than or equal to zero and i and i^* are less than or
equal to zero; p at horizon 80 is not larger than at horizon 36; y^* is
no more than one-half of that of y on impact and the decline in i^* is
not larger than one-half of the decline in i on impact. The second set
consists of shape restrictions on the exchange rate: the exchange rate
responses falls between lags 1-2, 2-3, 3-4, 4-6, 6-12, 12-18, 18-36, 18-80.

31

<<   31   32   33   34   35   36   37   >>

More intriguing information