Monetary Policy Transmission in Italy: A BVAR Analysis with Sign Restriction

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Title:Monetary Policy Transmission in Italy: A BVAR Analysis with Sign Restriction
Creators:
Migliardo, Carlo
Journal or Publication Title:
AUCO Czech Economic Review, 4, 2, pp. 139-168
Uncontrolled Keywords:Bayesian VAR methods, conjugate prior, Litterman prior, Markov chain Monte Carlo, monetary policy, regime switching, sign restriction identification

Abstract

In this paper, we propose a Bayesian VAR model to examine the short term effects of monetary policy shocks on the Italian economy. Firstly, our BVAR model uses the Cholesky decomposition to identify four kinds of macroeconomic shocks, namely, supply, demand, interest rate and monetary shocks. Then, from the theoretical model, we derive and impose a minimum set of robust sign restrictions to identify the transmission mechanism of monetary tightening. The outcomes from the sign identification confirm the micro evidence on inflation persistence. Moreover, our results show a greater persistence of inflation to monetary restriction than Cholesky identification presents. Overall, we find that a monetary innovation brings a decline of 30 basis point of GDP, this result is almost invariant across both prior and identification technique.

Official URL: http://www.ceeol.com/aspx/issuedetails.aspx?issueid=770E8657-FF06-4238-B4AE-70B7B8ABF697&articleid=EBCB9221-1D32-482B-B08D-663060B75711

Title:Monetary Policy Transmission in Italy: A BVAR Analysis with Sign Restriction
Creators:
Migliardo, Carlo
Uncontrolled Keywords:Bayesian VAR methods, conjugate prior, Litterman prior, Markov chain Monte Carlo, monetary policy, regime switching, sign restriction identification
Subjects:H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
H Social Sciences > HF Commerce
Divisions:Section of external journals > AUCO Czech Economic Review
Journal or Publication Title:AUCO Czech Economic Review
Volume:4
Number:2
Page Range:pp. 139-168
ISSN:1802-4696
Publisher:Charles University
Related URLs:
URLURL Type
http://auco.cuni.czPublisher
http://avi.lib.cas.cz/node/183Publisher
ID Code:6174
Item Type:Article
Deposited On:01 Jul 2010 17:40
Last Modified:01 Jul 2010 15:40

Citation

Migliardo, Carlo (2010) Monetary Policy Transmission in Italy: A BVAR Analysis with Sign Restriction. AUCO Czech Economic Review, 4 (2). pp. 139-168. ISSN 1802-4696

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