Working Papers
Dynamic Effects of Monetary Policy: Evidence from Time-Varying Proxy SVARs
​How does monetary policy affect the real economy? Does the effect change when the dynamics of the economy change over time? I estimate a generalized VAR model that allows for the coefficients to vary over time to answer these questions. I use a new measure of monetary policy surprises instruments to identify the structural shock. The new instruments include regressing high frequency monetary policy surprises on a set of predictor variables to reduce the possible endogeneity remaining in the high frequency instruments. Estimated coefficients show significant time variation in the sample period, while the impulse responses are estimated to be similar across time periods. The new orthogonalized monetary policy surprises instrument generated much more pronounced responses to the structural monetary policy shocks, compared to the conventional instrument.
Spillovers of the U.S. Unconventional Monetary Policy on Emerging Markets
How does a monetary policy announcement in the U.S. be interpreted by global investors when it contains different monetary policy instruments? Do unconventional monetary policies work in a different way than conventional ones, and how does it differ across countries? This paper answers these questions by separately identifying the surprise components in different monetary policy instruments and estimating their effects on various assets. Using data from South Korea and Mexico, I find that an increase in the fed funds rate and forward guidance factors raised the government bond yields, lowered the stock market growth, and appreciated the local currencies against the USD, with a generally larger magnitude for Mexico. While the fed funds rate and forward guidance factor had a significant effect on government bond yields, fed funds rate shocks were the primary factor in the pre-zero lower bound(ZLB) period, while forward guidance became more important in the post-ZLB period for both countries. Large-Scale Asset Purchases(LSAP) factor was not significant for asset prices in Mexico. This evidence suggests that the spillover of a forward guidance shock occurs mainly through the appreciation expectations of Mexican currency.