| Title: |
TRANSMISSION OF MONETARY SHOCKS: THE FAVAR APPROACH. |
| Authors: |
BESSONOVS, ANDREJS |
| Source: |
Journal of Economics & Management Research; 2012, Vol. 1, p21-32, 12p |
| Subject Terms: |
TRANSMISSION mechanism (Monetary policy); ECONOMIC shock; VECTOR autoregression model; MONETARY policy; ECONOMICS |
| Company/Entity: |
BANK of Latvia (Company) |
| Abstract: |
This paper reviews the concept of monetary transmission within a rather new econometric framework of macroeconomics - Factor Augmented Vector Autoregression (FAVAR). The study discusses recent advancements regarding the econometric estimation of monetary policy effects and reviews the latest literature on that topic. It also describes the general concept of FAVAR as suggested by Bernanke et al. (2005). This study stresses the importance of monetary policy analysis in Latvia, bearing in mind the aim of the Bank of Latvia to accede to the euro area and introduce the euro in 2014. In becoming participants of the euro area Latvia will face new challenges with regard to how to consequently analyse monetary policy and for this purpose shall need to utilise the appropriate tools to capture monetary effects on real economy. This paper discusses potential solutions on how to analyse monetary effects for small open economies within FAVAR and possible solutions for Latvia. [ABSTRACT FROM AUTHOR] |
| : |
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| Database: |
Complementary Index |