Template-Type: ReDIF-Paper 1.0
Title: Making a Weak Instrument Set Stronger: Factor-Based Estimation of the Taylor Rule 
Author-Name: Harun Mirza
Author-Email: h.mirza@uni-bonn.de
Author-Name: Lidia Storjohann
Author-Email: lidia_st@uni-bonn.de
Classification-JEL: E31, E52, C22
Keywords: Taylor Rule, Weak Instruments, Factor Models
Abstract: 	The problem of weak identification has recently attracted attention in the 
	analysis of structural macroeconomic models. Using robust methods can result in large 
	confidence sets making inference difficult. We overcome this problem in the analysis 
	of a forward-looking Taylor rule by seeking stronger instruments. We suggest exploiting 
	information from a large macroeconomic data set by generating factors and using them as 
	additional instruments. This approach results in a stronger instrument set and hence smaller 
	weak-identification robust confidence sets. It allows us to conclude that there has been a 
	shift in monetary policy from the pre-Volcker regime to the Volcker-Greenspan tenure.
Note: 
Length: 22
Creation-Date: 2011-12
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse13_2011.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse13_2012