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The Effect of News Shocks and Monetary Policy

Luca Gambetti, Dimitris Korobilis, John D. Tsoukalas and Francesco Zanetti ()
Additional contact information
Luca Gambetti: Universitat Autònoma de Barcelona
John D. Tsoukalas: University of Glasgow

No 1705, BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics

Abstract: A VAR model estimated on U.S. 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 TFP 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; VAR models; DSGE models. (search for similar items in EconPapers)
JEL-codes: E20 E32 E43 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2017-09
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http://www.bbk.ac.uk/ems/research/BirkCAM/working-papers/BCAM1705.pdf First version, 2017 (application/pdf)

Related works:
Working Paper: The Effect of News Shocks and Monetary Policy (2019) Downloads
Working Paper: The effect of news shocks and monetary policy (2019) Downloads
Working Paper: The Effect of News Shocks and Monetary Policy (2018) Downloads
Working Paper: The Effect of News Shocks and Monetary Policy (2017) Downloads
Working Paper: The effect of news shocks and monetary policy (2017) Downloads
Working Paper: The Effect of News Shocks and Monetary Policy (2017) Downloads
Working Paper: The Effect of News Shocks and Monetary Policy (2017) Downloads
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