Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
A Markov switching factor-augmented VAR model for analyzing US business cycles and monetary policy
() and Manfred M. Fischer
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.
Keywords: Non-linear FAVAR, business cycles, monetary policy, structural model; (follow links to similar papers)
JEL-Codes: C30,; E52,; F41,; E32; (follow links to similar papers)
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design Joakim Ekebom