Working Papers

2013-24 | August 2013


Semiparametric Estimates of Monetary Policy Effects: String Theory Revisited


We develop flexible semiparametric time series methods that are then used to assess the causal effect of monetary policy interventions on macroeconomic aggregates. Our estimator captures the average causal response to discrete policy interventions in a macro-dynamic setting, without the need for assumptions about the process generating macroeconomic outcomes. The proposed procedure, based on propensity score weighting, easily accommodates asymmetric and nonlinear responses. Application of this estimator to the effects of monetary restraint shows the Fed to be an effective inflation fighter. Our estimates of the effects of monetary accommodation, however, suggest the Federal Reserve's ability to stimulate real economic activity is more modest. Estimates for recent financial crisis years are similar to those for the earlier, pre-crisis period.

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Article Citation

Angrist, Joshua D, Òscar Jordà, and Guido M. Kuersteiner. 2013. "Semiparametric Estimates of Monetary Policy Effects: String Theory Revisited," Federal Reserve Bank of San Francisco Working Paper 2013-24. Available at