Risk aversion, uncertainty, and monetary policy: Structural vector autoregressions identified with high-frequency external instruments

摘要

This study uses structural vector autoregression models to examine the monetary policy (MP) effects on risk aversion, uncertainty, and inflation. MP shocks are identified with high-frequency external instruments, rather than Cholesky decomposition. The instruments include asset price changes in the 30-minute window around FOMC announcements and their decomposition into three orthogonal factors. The impulse-response analysis results are consistent with the standard MP effects theory, unlike with the Cholesky decomposition method. (C) 2019 Elsevier B.V. All rights reserved.