 The Effect of News Shocks and Monetary PolicyLuca Gambetti, Dimitris Korobilis, John Tsoukalas and Francesco Zanetti 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) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bbk:bbkcam:1705 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in BCAM Working Papers from Birkbeck Centre for Applied Macroeconomics Malet St.,London WC1E 7HX, UK. |
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