Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74649
Authors: 
Mirza, Harun
Storjohann, Lidia
Year of Publication: 
2011
Series/Report no.: 
Bonn Econ Discussion Papers 13/2011
Abstract: 
The problem of weak identification has recently attracted attention in the analysis of structural macroeconomic models. Using robust methods can result in large confidence sets making inference difficult. We overcome this problem in the analysis of a forward-looking Taylor rule by seeking stronger instruments. We suggest exploiting information from a large macroeconomic data set by generating factors and using them as additional instruments. This approach results in a stronger instrument set and hence smaller weak-identification robust confidence sets. It allows us to conclude that there has been a shift in monetary policy from the pre-Volcker regime to the Volcker-Greenspan tenure.
Subjects: 
Taylor Rule
Weak Instruments
Factor Models
JEL: 
E31
E52
C22
Document Type: 
Working Paper

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