Identification of Systematic Monetary Policy

Lukas Hack, Klodiana Istrefi and Matthias Meier

No 17999, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We propose a novel identification design to estimate the effects of systematic monetary policy on the propagation of macroeconomic shocks. The design combines (i) a time-varying measure of systematic monetary policy based on the historical composition of hawks and doves in the FOMC with (ii) an instrument that leverages the FOMC rotation of voting rights. We apply our design to government spending shocks. We find that a dovish FOMC supports the expansionary effects of higher spending by delaying policy rate hikes, leading to large fiscal multipliers. GDP does not expand when the FOMC is hawkish, but inflation expectations are contained.

Keywords: Systematic monetary policy; Fomc; Rotation; Government spending (search for similar items in EconPapers)
JEL-codes: E32 E52 E62 E63 H56 (search for similar items in EconPapers)
Date: 2023-03
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Related works:
Working Paper: Identification of Systematic Monetary Policy (2024)
Working Paper: Identification of systematic monetary policy (2023)
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