Title: Time Varying IV-SVARs and the effects of monetary policy on financial variables
Authors: Robin Braun - Bank of England and London School of Economics (United Kingdom) [presenting]
George Kapetanios - Kings College, University of London (United Kingdom)
M. Marcellino - Bocconi University (Italy)
Abstract: Parameter instability is pervasive in economics but there is no consensus on the best way to model it, as that depends on the specific process driving parameter changes. We develop kernel-based estimation for time-varying vector autoregressive models identified by instrumental variables (SVAR-IV), a flexible method that allows general (non-parametric) parameter evolution. Specifically, we derive the asymptotic distribution for parameter estimates and impulse responses of various SVAR-IV representations. We then apply the method to study the changes in the effects of monetary policy on financial variables.