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

Publikation: Working/Discussion PaperWU Working Paper

115 Downloads (Pure)

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.
OriginalspracheEnglisch
ErscheinungsortVienna
HerausgeberWU Vienna University of Economics and Business
DOIs
PublikationsstatusVeröffentlicht - 1 Aug. 2015

Publikationsreihe

ReiheDepartment of Economics Working Paper Series
Nummer201

WU Working Paper Reihe

  • Department of Economics Working Paper Series

Zitat