Is There an Information Channel of Monetary Policy?

Oliver Holtemöller, Alexander Kriwoluzky and Boreum Kwak

No 2084, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Exploiting the heteroscedasticity of the changes in short-term and long-term interest rates and exchange rates around the FOMC announcement, we identify three structural monetary policy shocks. We eliminate the predictable part of the shocks and study their effects on financial variables and macro variables. The first shock resembles a conventional monetary policy shock, and the second resembles an unconventional monetary shock. The third shock leads to an increase in interest rates, stock prices, industrial production, consumer prices, and commodity prices. At the same time, the excess bond premium and uncertainty decrease, and the U.S. dollar depreciates. Therefore, this third shock combines all the characteristics of a central bank information shock.

Keywords: Monetary policy; central bank information shock; identification through heteroskedasticity; high-frequency identification; proxy SVAR (search for similar items in EconPapers)
JEL-codes: C36 E52 E58 (search for similar items in EconPapers)
Pages: 21 p.
Date: 2024
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Working Paper: Is there an information channel of monetary policy? (2024)
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