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Evaluating Policy Counterfactuals: A VAR-Plus Approach

Author

Listed:
  • Tomás E. Caravello
  • Alisdair McKay
  • Christian K. Wolf

Abstract

In a rich family of linearized structural macroeconomic models, the counterfactual evolution of the macro-economy under alternative policy rules is pinned down by just two objects: first, reduced-form projections with respect to a large information set; and second, the dynamic causal effects of policy shocks. In particular, no assumptions about the structural shocks affecting the economy are needed. We propose to recover these two sufficient statistics using a ``VAR-Plus'' approach, and apply it to evaluate several monetary policy counterfactuals.

Suggested Citation

  • Tomás E. Caravello & Alisdair McKay & Christian K. Wolf, 2024. "Evaluating Policy Counterfactuals: A VAR-Plus Approach," NBER Working Papers 32988, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32988
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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