Monetary policy uncertainty

Lucas Husted, John Rogers and Bo Sun

Journal of Monetary Economics, 2020, vol. 115, issue C, 20-36

Abstract: We construct a new measure of uncertainty about Federal Reserve policy actions and their consequences, a monetary policy uncertainty (MPU) index. We evaluate the information content of our index and document the usefulness of our index in bridging periods of conventional and unconventional policy making. We also estimate the aggregate effects of shocks to MPU on output, credit spreads, and other variables. Finally, we investigate the transmission channels of MPU, finding that heightened MPU leads to protracted declines in firm investment through both real options and financial frictions channels.

Keywords: Monetary transmission; Uncertainty index; Firm-level investment; Textual analysis (search for similar items in EconPapers)
JEL-codes: E40 E50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (119)

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Working Paper: Monetary Policy Uncertainty (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:115:y:2020:i:c:p:20-36

DOI: 10.1016/j.jmoneco.2019.07.009

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