Row 499

Row ID: 499 | Dataset Entry | Axioma AXP Content Repository

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Dear friends, I have a problem with the methodology of my undergraduate research project and would appreciate some help a lot.

I am conducting some tests to observe if there are impacts of the central bank’s repo balance in Brazil on monetary policy transmission. My approach is based on the estimation of a SVAR and its comparison with a similar SVAR with additional restriction. To be more precise, I estimate the first SVAR with the contemporaneous effect of repo over consumption “turned on”, then I “turn It off” and compare the models’ impulse-response functions. These procedures are somewhat related to what you may find in Lettau, Ludvigson & Steindel (2002).

https://preview.redd.it/fcr1op1hoys51.png?width=497&format=png&auto=webp&s=8e72e8d584f3f6e9e0ce19c40fb96b29c68d5bcd

A problematic factor that I have been facing with this approach involves the fact that the criteria used to decide whether the effect over monetary transmission is relevant or not is the change in the second IRF to a value beyond the 95% CI bands of the first IRF. This *per se* is not a problem. But the fact is that CI bands for these IRFs are very large, what makes almost impossible to consider any change as statistically significant through this methodology. In fact, in another work that I am using to guide my approach (CUNHA ET AL., 2016), the authors use the same strategy to test for monetary policy’s wealth channel, using 14 different types of assets as wealth, and do not come even close to provide evidence for its existence with any of them. Of course this can be just an evidence of the inexistence of the wealth channel in Brazil, but it seems to me that It can also be one more evidence of the difficulty of rejecting H0 that this methodology creates.

https://preview.redd.it/gamq9qeioys51.png?width=542&format=png&auto=webp&s=9a90dbce10c7f4082620715febc8feb10778f5f1

In the example above, the consumption reaction to a monetary shock differs 270% when repos are “turned off”. However, the inferior CI limit, differs 800% from CI’s average for the “turned on” stage.

With all that said, I would like to ask you guys if there is a way to overcome this problem, or if there is any other methodological approach (undergraduate level) you would propose to investigate this question.

Thanks in advance

References

\[1\] Lettau, M., Ludvigson, S., & Steindel, C. (2002). Monetary policy transmission through the consumption-wealth channel. *FRBNY Economic Policy Review*, *5*, 117-133.

\[2\] CUNHA, Daniel C.; LEITE, Lucas G.; LEISTER, Mauricio D. A gestão da dívida pública, o efeito riqueza e a transmissão da política monetária. Brasília: Tesouro Nacional, 2016. Portuguese Only.

Field	Value
text	Dear friends, I have a problem with the methodology of my undergraduate research project and would appreciate some help a lot. I am conducting some tests to observe if there are impacts of the central bank’s repo balance in Brazil on monetary policy transmission. My approach is based on the estimation of a SVAR and its comparison with a similar SVAR with additional restriction. To be more precise, I estimate the first SVAR with the contemporaneous effect of repo over consumption “turned on”, th…
label	r/econpapers
dataType	post
communityName	r/EconPapers
datetime	2020-10-14
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Raw Record

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  "text": "Dear friends, I have a problem with the methodology of my undergraduate research project and would appreciate some help a lot.\n\nI am conducting some tests to observe if there are impacts of the central bank’s repo balance in Brazil on monetary policy transmission. My approach is based on the estimation of a SVAR and its comparison with a similar SVAR with additional restriction. To be more precise, I estimate the first SVAR with the contemporaneous effect of repo over consumption “turned on”, then I “turn It off” and compare the models’ impulse-response functions. These procedures are somewhat related to what you may find in Lettau, Ludvigson & Steindel (2002).\n\n&#x200B;\n\nhttps://preview.redd.it/fcr1op1hoys51.png?width=497&format=png&auto=webp&s=8e72e8d584f3f6e9e0ce19c40fb96b29c68d5bcd\n\n&#x200B;\n\nA problematic factor that I have been facing with this approach involves the fact that the criteria used to decide whether the effect over monetary transmission is relevant or not is the change in the second IRF to a value beyond the 95% CI bands of the first IRF. This *per se* is not a problem. But the fact is that CI bands for these IRFs are very large, what makes almost impossible to consider any change as statistically significant through this methodology. In fact, in another work that I am using to guide my approach (CUNHA ET AL., 2016), the authors use the same strategy to test for monetary policy’s wealth channel, using 14 different types of assets as wealth, and do not come even close to provide evidence for its existence with any of them. Of course this can be just an evidence of the inexistence of the wealth channel in Brazil, but it seems to me that It can also be one more evidence of the difficulty of rejecting H0 that this methodology creates.\n\n&#x200B;\n\nhttps://preview.redd.it/gamq9qeioys51.png?width=542&format=png&auto=webp&s=9a90dbce10c7f4082620715febc8feb10778f5f1\n\n&#x200B;\n\nIn the example above, the consumption reaction to a monetary shock differs 270% when repos are “turned off”. However, the inferior CI limit, differs 800% from CI’s average for the “turned on” stage.\n\nWith all that said, I would like to ask you guys if there is a way to overcome this problem, or if there is any other methodological approach (undergraduate level) you would propose to investigate this question.\n\nThanks in advance\n\n&#x200B;\n\nReferences\n\n\\[1\\] Lettau, M., Ludvigson, S., & Steindel, C. (2002). Monetary policy transmission through the consumption-wealth channel. *FRBNY Economic Policy Review*, *5*, 117-133.\n\n\\[2\\] CUNHA, Daniel C.; LEITE, Lucas G.; LEISTER, Mauricio D. A gestão da dívida pública, o efeito riqueza e a transmissão da política monetária. Brasília: Tesouro Nacional, 2016. Portuguese Only.",
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Entry Information

Entry ID: 499
Repository: Axioma AXP
Dataset: arrmlet/reddit_dataset_36
Total Entries: 100,000