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MONETARY POLICY SHOCKS, EXPECTATIONS, AND INFORMATION RIGIDITIES

Joscha Beckmann () and Robert Czudaj ()

Economic Inquiry, 2018, vol. 56, issue 4, 2158-2176

Abstract: This paper contributes to the literature by assessing expectation effects from monetary policy for G7 economies. We rely on expectation data from Consensus Economics and a panel vector autoregression framework, which accounts for international spillovers and time‐variation. We analyze whether monetary policy has changed the degree of information rigidity after the emergence of the subprime crisis and estimate effects of interest rate changes on expectations, disagreements, and forecast errors. We find strong evidence for information rigidities and identify higher forecast errors by professionals after monetary policy shocks. Our results suggest that the international transmission of monetary policy shocks introduces noisy information and partly increases disagreement among forecasters. (JEL E31, E52)

Date: 2018
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https://doi.org/10.1111/ecin.12587

Related works:
Working Paper: Monetary policy shocks, expectations and information rigidities (2018) Downloads
Working Paper: Monetary policy shocks, expectations and information rigidities (2018) Downloads
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