The Effect of News Shocks and Monetary Policy

Luca Gambetti, Christoph Görtz, Dimitris Korobilis, John D. Tsoukalas and Francesco Zanetti

A chapter in Essays in Honour of Fabio Canova, 2022, vol. 44A, pp 139-164 from Emerald Group Publishing Limited

Abstract: A vector autoregression model estimated on US data before and after 1980 documents systematic differences in the response of short- and long-term interest rates, corporate bond spreads and durable spending to news total factor productivity shocks. Interest rates across the maturity spectrum broadly increase in the pre-1980s and broadly decline in the post-1980s. Corporate bond spreads decline significantly, and durable spending rises significantly in the post-1980 period while the opposite short-run response is observed in the pre-1980 period. Measuring expectations of future monetary policy rates conditional on a news shock suggests that the Federal Reserve has adopted a restrictive stance before the 1980s with the goal of retaining control over inflation while adopting a neutral/accommodative stance in the post-1980 period.

Keywords: News shocks; business cycles; vector autoregression models; monetary policy; Great Moderation; total factor productivity news; E20; E32; E43; E52 (search for similar items in EconPapers)
Date: 2022
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Related works:
Working Paper: The Effect of News Shocks and Monetary Policy (2019)
Working Paper: The effect of news shocks and monetary policy (2019)
Working Paper: The Effect of News Shocks and Monetary Policy (2018)
Working Paper: The Effect of News Shocks and Monetary Policy (2017)
Working Paper: The Effect of News Shocks and Monetary Policy (2017)
Working Paper: The effect of news shocks and monetary policy (2017)
Working Paper: The Effect of News Shocks and Monetary Policy (2017)
Working Paper: The Effect of News Shocks and Monetary Policy (2017)
Working Paper: The Effect of News Shocks and Monetary Policy (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-90532022000044a005

DOI: 10.1108/S0731-90532022000044A005

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