{"title":"Monetary policy and exchange rate anomalies in set-identified SVARs: Revisited","authors":"Sebastian K. Rüth, Wouter Van der Veken","doi":"10.1002/jae.2999","DOIUrl":null,"url":null,"abstract":"<div>\n \n <p>Set-identified vector autoregressions typically document violations of uncovered interest rate parity (<i>forward discount puzzle</i>) and <i>gradual</i> appreciation–depreciation cycles of exchange rates (<i>delayed overshooting puzzle</i>) following contractionary monetary policy shocks. We revisit both anomalies in a framework similar to Kim et al. (2017, JPE). We complement their identifying restrictions on how monetary policy <i>affects</i> the economy with restrictions on (i) how monetary policy <i>reacts</i> to the economy and (ii) historical monetary policy innovations. In this hybrid identification, no major forward discount premia emerge. Once we additionally impose that monetary policy propagates through <i>domestic</i> financial conditions, exchange rates also overshoot with less delay.</p>\n </div>","PeriodicalId":48363,"journal":{"name":"Journal of Applied Econometrics","volume":null,"pages":null},"PeriodicalIF":2.3000,"publicationDate":"2023-07-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Applied Econometrics","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/jae.2999","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Set-identified vector autoregressions typically document violations of uncovered interest rate parity (forward discount puzzle) and gradual appreciation–depreciation cycles of exchange rates (delayed overshooting puzzle) following contractionary monetary policy shocks. We revisit both anomalies in a framework similar to Kim et al. (2017, JPE). We complement their identifying restrictions on how monetary policy affects the economy with restrictions on (i) how monetary policy reacts to the economy and (ii) historical monetary policy innovations. In this hybrid identification, no major forward discount premia emerge. Once we additionally impose that monetary policy propagates through domestic financial conditions, exchange rates also overshoot with less delay.
期刊介绍：
The Journal of Applied Econometrics is an international journal published bi-monthly, plus 1 additional issue (total 7 issues). It aims to publish articles of high quality dealing with the application of existing as well as new econometric techniques to a wide variety of problems in economics and related subjects, covering topics in measurement, estimation, testing, forecasting, and policy analysis. The emphasis is on the careful and rigorous application of econometric techniques and the appropriate interpretation of the results. The economic content of the articles is stressed. A special feature of the Journal is its emphasis on the replicability of results by other researchers. To achieve this aim, authors are expected to make available a complete set of the data used as well as any specialised computer programs employed through a readily accessible medium, preferably in a machine-readable form. The use of microcomputers in applied research and transferability of data is emphasised. The Journal also features occasional sections of short papers re-evaluating previously published papers. The intention of the Journal of Applied Econometrics is to provide an outlet for innovative, quantitative research in economics which cuts across areas of specialisation, involves transferable techniques, and is easily replicable by other researchers. Contributions that introduce statistical methods that are applicable to a variety of economic problems are actively encouraged. The Journal also aims to publish review and survey articles that make recent developments in the field of theoretical and applied econometrics more readily accessible to applied economists in general.
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