Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130782
Authors: 
Giraitis, Liudas
Kapetanios, George
Theodoridis, Konstantinos
Yates, Tony
Year of Publication: 
2015
Series/Report no.: 
Working Paper, School of Economics and Finance, Queen Mary University of London 768
Abstract: 
Following Giraitis, Kapetanios, and Yates (2014b), this paper uses kernel methods to estimate a seven variable time-varying (TV) vector autoregressive (VAR) model on the data set constructed by Smets and Wouters (2007). We apply an indirect inference method to map from this TV VAR to time variation in implied Dynamic Stochastic General Equilibrium (DSGE) parameters. We find that many parameters change substantially, particularly those defining nominal rigidities, habits and investment adjustment costs. In contrast to the 'Great Moderation' literature our monetary policy parameter estimates suggest that authorities tried to deliver a low and stable inflation from 1975 onwards, however, the severe adverse supply shocks in the 70s could have caused these policies to fail.
Subjects: 
DSGE
Structural change
Kernel estimation
Time-varying VAR
Monetary policy shocks
JEL: 
E52
E61
E66
C14
C18
Document Type: 
Working Paper

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