Survey_CEE_2005

Abstract

The CEE (2005) model was estimated for the U.S. economy over the period 1959:2- 2001:4 by matching the impulse response function to the monetary shock in a structural VAR. An important assumption of the VAR that carries over to the model is that monetary policy innovations affect the interest rate in the same quarter, but other variables, including output and inflation, only by the following quarter. The monetary policy innovation represents the single, exogenous economic shock in the original CEE model. However, additional shocks can be incorporated in the structural model and the variance of such shocks may be estimated using the same methodology. Theadditional shocks would first be identified in the structural VAR.