Lecture 3 Slides

Lecture 3 Slides - Economics 210c/236a Fall 2011 Christina...

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L ECTURE 3 The Effects of Monetary Changes: Vector Autoregressions September 14, 2011 Economics 210c/236a Christina Romer Fall 2011 David Romer
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I. VAR S IN G ENERAL
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A Two-Variable VAR Suppose the true model is: where ε 1t and ε 2t are uncorrelated with one another, with the contemporaneous and lagged values of the right-hand side variables, and over time.
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Rewrite this as: or where
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This implies where
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Extending to K Variables and N Lags The “true model” takes the form: where C is K x K, X is K x 1, B is K x K, and E is K x 1. This leads to: where
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II. C HRISTIANO , E ICHENBAUM , AND E VANS , “T HE E FFECTS OF M ONETARY P OLICY S HOCKS : E VIDENCE FROM THE F LOW OF F UNDS
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Simplified Version of Christiano, Eichenbaum, and Evans
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From: Christiano, Eichenbaum, and Evans, “The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds”
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From: Christiano, Eichenbaum, and Evans
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From: Christiano, Eichenbaum, and Evans
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From: Christiano, Eichenbaum, and Evans
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III. G ALÍ , “H OW W ELL D OES THE IS-LM M ODEL F IT P OSTWAR U.S. D ATA ?”
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Lecture 3 Slides - Economics 210c/236a Fall 2011 Christina...

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