Exploring Monetary Policy Shocks with Large-Scale Bayesian VARs
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arXiv
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| Format: | Preprint |
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2025
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| _version_ | 1866909607110115328 |
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| author | Korobilis, Dimitris |
| author_facet | Korobilis, Dimitris |
| contents | I introduce a high-dimensional Bayesian vector autoregressive (BVAR) framework designed to estimate the effects of conventional monetary policy shocks. The model captures structural shocks as latent factors, enabling computationally efficient estimation in high-dimensional settings through a straightforward Gibbs sampler. By incorporating time variation in the effects of monetary policy while maintaining tractability, the methodology offers a flexible and scalable approach to empirical macroeconomic analysis using BVARs, well-suited to handle data irregularities observed in recent times. Applied to the U.S. economy, I identify monetary shocks using a combination of high-frequency surprises and sign restrictions, yielding results that are robust across a wide range of specification choices. The findings indicate that the Federal Reserve's influence on disaggregated consumer prices fluctuated significantly during the 2022-24 high-inflation period, shedding new light on the evolving dynamics of monetary policy transmission. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2505_06649 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Exploring Monetary Policy Shocks with Large-Scale Bayesian VARs Korobilis, Dimitris Econometrics Applications I introduce a high-dimensional Bayesian vector autoregressive (BVAR) framework designed to estimate the effects of conventional monetary policy shocks. The model captures structural shocks as latent factors, enabling computationally efficient estimation in high-dimensional settings through a straightforward Gibbs sampler. By incorporating time variation in the effects of monetary policy while maintaining tractability, the methodology offers a flexible and scalable approach to empirical macroeconomic analysis using BVARs, well-suited to handle data irregularities observed in recent times. Applied to the U.S. economy, I identify monetary shocks using a combination of high-frequency surprises and sign restrictions, yielding results that are robust across a wide range of specification choices. The findings indicate that the Federal Reserve's influence on disaggregated consumer prices fluctuated significantly during the 2022-24 high-inflation period, shedding new light on the evolving dynamics of monetary policy transmission. |
| title | Exploring Monetary Policy Shocks with Large-Scale Bayesian VARs |
| topic | Econometrics Applications |
| url | https://arxiv.org/abs/2505.06649 |