Market-Based Monetary Policy Uncertainty
Aeimit Lakdawala,
Michael Bauer and
Philippe Mueller ()
No 1403, 2019 Meeting Papers from Society for Economic Dynamics
Abstract:
Monetary policy announcements are surrounded by substantial uncertainty about the type, direction and magnitude of the policy action. Using a novel, market-based measure of monetary policy uncertainty we document a systematic, predictable pattern over the course of the FOMC meeting cycle: FOMC announcements lead to substantial resolution of uncertainty, which then gradually ramps up over the intermeeting period. Changes in uncertainty about the future policy path capture a distinct second dimension of monetary policy actions that is relevant for the transmission to financial markets. In particular, the Federal Reserve's forward guidance announcements affected asset prices not only by adjusting the expected policy path but also by changing market-perceived uncertainty about this path.
Date: 2019
New Economics Papers: this item is included in nep-ifn and nep-mon
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Citations: View citations in EconPapers (18)
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Related works:
Journal Article: Market-Based Monetary Policy Uncertainty (2022) 
Working Paper: Market-Based Monetary Policy Uncertainty (2021) 
Working Paper: Market-based monetary policy uncertainty (2019) 
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1403
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