A Markov switching factor-augmented VAR model for analyzing US business cycles and monetary policy

Huber, Florian and Fischer, Manfred M. (2015) A Markov switching factor-augmented VAR model for analyzing US business cycles and monetary policy. Department of Economics Working Paper Series, 201. WU Vienna University of Economics and Business, Vienna.

[img]
Preview
PDF
wp201.pdf

Download (553kB)

Abstract

This paper develops a multivariate regime switching monetary policy model for the US economy. To exploit a large dataset we use a factor-augmented VAR with discrete regime shifts, capturing distinct business cycle phases. The transition probabilities are modelled as time-varying, depending on a broad set of indicators that influence business cycle movements. The model is used to investigate the relationship between business cycle phases and monetary policy. Our results indicate that the effects of monetary policy are stronger in recessions, whereas the responses are more muted in expansionary phases. Moreover, lagged prices serve as good predictors for business cycle transitions.

Item Type: Paper
Keywords: Non-linear FAVAR / business cycles / monetary policy / structural model
Classification Codes: JEL C30, E52, F41, E32
Divisions: Departments > Sozioökonomie
Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 13 Aug 2015 09:26
Last Modified: 22 Oct 2019 00:41
FIDES Link: https://bach.wu.ac.at/d/research/results/83302/
URI: https://epub.wu.ac.at/id/eprint/4626

Actions

View Item View Item

Downloads

Downloads per month over past year

View more statistics