High Frequency Identification of Monetary Non-Neutrality: The Information Effect

Emi Nakamura and Jón Steinsson

No 19260, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present estimates of monetary non-neutrality based on evidence from high-frequency responses of real interest rates, expected inflation, and expected output growth. Our identifying assumption is that unexpected changes in interest rates in a 30-minute window surrounding scheduled Federal Reserve announcements arise from news about monetary policy. In response to an interest rate hike, nominal and real interest rates increase roughly one-for-one, several years out into the term structure, while the response of expected inflation is small. At the same time, forecasts about output growth also increase—the opposite of what standard models imply about a monetary tightening. To explain these facts, we build a model in which Fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals. Our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output.

JEL-codes: E30 E40 E50 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-mst
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

Published as Emi Nakamura & Jón Steinsson, 2018. "High-Frequency Identification of Monetary Non-Neutrality: The Information Effect*," The Quarterly Journal of Economics, vol 133(3), pages 1283-1330.

Downloads: (external link)
http://www.nber.org/papers/w19260.pdf (application/pdf)

Related works:
Journal Article: High-Frequency Identification of Monetary Non-Neutrality: The Information Effect (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:19260

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19260

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().