The impact of monetary policy shocks — Do not rule out central bank information effects or economic news

Sebastian Laumer and Italo Morais Santos

Economics Letters, 2024, vol. 237, issue C

Abstract: This paper reassesses the impact of monetary policy and central bank information shocks while accounting for the influence of economic news. We regress a set of monetary policy surprises on a measure of economic news and incorporate these new instruments into an SVAR model. Furthermore, we distinguish between the two shocks via sign restrictions on the instruments’ impulse response functions. Our findings indicate significantly stronger and more enduring economic effects for monetary policy shocks, while the economic effects of central bank information shocks are weaker, if not vanish entirely. Nevertheless, persistent financial effects prevent us from completely dismissing the existence of central bank information effects. Consequently, it is important to account for both the effects of central bank information shocks and economic news in monetary policy settings.

Keywords: Monetary policy; Central bank information channel; Economic news (search for similar items in EconPapers)
JEL-codes: C32 E43 E44 E52 E58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:237:y:2024:i:c:s0165176524001174

DOI: 10.1016/j.econlet.2024.111634

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