Identification and the narrative approach: A reply to Leeper |
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| Authors: | Christina D Romer David H Romer |
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| Institution: | Department of Economics, University of California, Berkeley, CA 94720, USA |
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| Abstract: | Contrary to the arguments of Leeper (1997), the problems that arise in VAR investigations of monetary policy do not arise with our use of the narrative approach. The apparent high predictability of our monetary-policy variable that Leeper finds is due to overfitting. And the estimated effects of our measure when variables other than output are considered are unsurprising given Leeper's specifications. |
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| Keywords: | Monetary policy Narrative approach |
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