Structural analysis with mixed-frequency data: A MIDAS-SVAR model of US capital flows

Abstract

We develop a new VAR model for structural analysis with mixed-frequency data. The MIDAS-SVAR model allows to identify structural dynamic links exploiting the information contained in variables sampled at different frequencies. It also provides a general framework to test homogeneous frequency-based representations versus mixed-frequency data models. A set of Monte Carlo experiments suggests that the test performs well both in terms of size and power. The MIDAS-SVAR is then used to study how monetary policy and financial market volatility impact on the dynamics of gross capital inflows to the US. While no relation is found when using standard quarterly data, exploiting the variability present in the series within the quarter shows that the effect of an interest rate shock is greater the longer the time lag between the month of the shock and the end of the quarter