Valid instruments and heteroskedasticity amplify impact of monetary policy shocks
The article combines different types of information to better understand how monetary policy affects the economy. By using external instruments and heteroskedasticity, researchers can identify the impact of monetary policy shocks more accurately. They found that using valid instruments and considering heteroskedasticity leads to a clearer picture of how monetary policy affects production and prices. High-frequency data instruments were not as reliable for this purpose.