Overnight Rate Innovations as a Measure of Monetary Policy Shocks in Vector Autoregressions
- Topics:
- Deflation
- Tags:
- Bank Of Canada,
- Channel Management,
- Innovation,
- Marketing,
- Measure,
- Retail,
- Value-added Reseller
- Source:
- Bank of Canada
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Overview: The authors examine the Bank of Canada's overnight rate as a measure of monetary policy in vector autoregression (VAR) models. Since the time series of the Bank's current measure of the overnight rate begins only in 1971, the authors splice it to day loan rate observations to obtain a sufficiently long period of data. He analysis yields four findings of interest. Finally, as a monetary policy variable in these VAR systems, Ron performs at least as well as either the 90-day paper rate or the term spread. The main conclusions are that Ron, the overnight rate variable developed by the authors, provides a good basis for measuring monetary policy actions in VAR-based analysis and that Ron innovations can provide a good measure of monetary policy shocks.
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Format: HTML | Size: 649KB | Date: Mar 1996 | Pages: 85
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