ECON 112 UC San Diego Belgium Monetary and Economic Policy Paper
Description
1 attachmentsSlide 1 of 1attachment_1attachment_1.slider-slide > img { width: 100%; display: block; }
.slider-slide > img:focus { margin: auto; }
Unformatted Attachment Preview
Econ 112: Macroeconomic Data Analysis
Assignment Main Task
Drawing upon the structural vector autoregression methodology, write a paper that provides empirical evidence
of whether changes in the short-term nominal interest rate due to monetary policy cause real GDP growth to
change in your assigned country.
Objectives of the Assignment
This assignment has two objectives. The first objective is to have you practice how to decide what is essential
and what it is not essential when you have to choose what numbers and figures to report out of your statistical
analysis. The second objective is to practice how to best express in writing the logic behind your empirical
analysis and the interpretation of your empirical results towards answering the main question of the paper.
Text of Assignment
Suppose you are a junior researcher in the research department of the central bank of your assigned country.
The head of research asks you to write a paper to be circulated among economists both at the bank and at
other academic institutions that evaluates whether there is any evidence that changes in the short-term nominal
interest rate cause real GDP growth to change. You should imagine that the economists that will read your
paper have a solid training in economics, but are not experts in time series econometrics.
Your paper should be organized according to the following structure. For each item the specific objectives are
indicated, but you should always remember that all items should contribute towards the main objective of the
paper, which is to evaluate whether changes in the short-term nominal interest rate due to monetary policy
cause real GDP growth to change.
Title:
Monetary Policy and Economic Activity in Assigned Country: A Structural VAR Approach
1. Introduction.
State what question you aim to answer with the paper, and what is the answer that your analysis is suggesting.
2. Monetary Policy Effectiveness: Theory and Empirical Challenges.
Explain why one should expect the short-term nominal interest rate to have an effect on real GDP growth.
Explain why obtaining empirical evidence of the causal relationship between the short-term interest rate and
real GDP growth is challenging. Describe how you will use Sims (1980) proposed solution estimating a VAR
and triangularizing the residuals to resolve the challenge. Explain what theoretical assumption corresponds
to the restrictions implied by Sims solution in the context of your analysis.
1
3. Data and VAR Estimation.
Outline what data you are using, plot data that you think are important. Estimate and present your preferred
VAR specification. Explain why the VAR you present is your preferred specification.
4. Is Monetary Policy Effective?
Report and explain the key empirical evidence that speaks to the main question of the paper and clearly explain
what answer it provides.
5. Discussion of Limitations and Robustness.
Discuss what you think are the main limitations of the interpretation you just gave to your empirical results.
Report any robustness checks that you might have performed and discuss their relevance for the answer you
have provided in 4.
Note: The body of the paper should be at least 1,500 words, excluding tables and figures.
2
Purchase answer to see full
attachment
Explanation & Answer:
1500 Words
Tags:
macroeconomics
economic policy
Belgium Monetary
User generated content is uploaded by users for the purposes of learning and should be used following FENTYESSAYS.COM ESSAY’s honor code & terms of service.
