Monetary Policy Shocks: Data or Methods?

Connor M. Brennan, Margaret Jacobson, Christian Matthes and Todd Walker

No 2024-011, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Different series of high-frequency monetary shocks can have a correlation coefficient as low as 0.5 and the same sign in only two-thirds of observations. Both data and methods drive these differences, which are starkest when the federal funds rate is at its effective lower bound. Methods that exploit the differential responsiveness of short- and long-term asset prices can incorporate additional information. After documenting differences in monetary shocks, we explore their consequence for inference. We find that empirical estimates of monetary policy transmission from local projections and VARs are less affected by shock choice than forecast revision specifications.

Keywords: High-frequency monetary policy shocks; Monetary policy transmission; Empirical monetary economics (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 E58 (search for similar items in EconPapers)
Pages: 49 p.
Date: 2024-02-28
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-11

DOI: 10.17016/FEDS.2024.011

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