Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153568
Authors: 
Benati, Luca
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper 1134
Abstract: 
Policy counterfactuals based on estimated structural VARs routinely suggest that bringing Alan Greenspan back in the 1970s’ United States would not have prevented the Great Inflation. We show that a standard policy counterfactual suggests that the Bundesbank–which is near-universally credited for sparing West Germany the Great Inflation–would also not have been able to prevent the Great Inflation in the United States. The sheer implausibility of this result sounds a cautionary note on taking the outcome of SVAR-based policy counterfactuals at face value, and raises questions on the very reliability of such exercises.
Subjects: 
Bayesian VARs
Great Inflation
identified VARs
policy counterfactuals
stochastic volatility
time-varying parameters
JEL: 
E32
E47
E52
E58
Document Type: 
Working Paper

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