Identifying a Forward-looking Monetary Policy in anOpen Economy

摘要

I identify a forward-looking monetary policy function in a forecast-augmented VAR (FOAVAR) model by using forecasted macroeconomic variables, in addition to the realized variables used in a standard VAR. i find that forecasted variables play a greaterrole than realized variables in a central bank's policy decisions. i also find that a contractionary policy shock in the FOAVAR generates impulse responses of macroeconomic variables that are consistent with the predictions of economic theory, while thesame shock causes a price puzzle and a delayed-overshooting response of the exchange rate in the standard model.