A1423
Title: Monetary policy surprises: Robust dynamic causal effects
Authors: Haowei Tang - Carleton University (Canada) [presenting]
Lynda Khalaf - Carleton University (Canada)
Abstract: The one-step local projection instrumental variable (LP-IV) approach is built on assessing the effects of a monetary policy shock on the US economy, focusing on inference. Methodologically, particular attention is paid to the specification of control variables that warrant exogeneity of the instrumental variables. A response parameter is introduced that is always identified and can account for misspecification. This response parameter enables us to rely on least-squares even when endogeneity is present. Associated findings are robust in expanding credit spread data and in various competing instruments that reflect conflicting views about the nature of central bank communication and the informational advantage of central banks.
