Monetary Policy Uncertainty and Monetary Policy Surprises

Michiel De Pooter, Giovanni Favara, Michele Modugno and Jason Wu ()

No 2020-032, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Monetary policy uncertainty affects the transmission of monetary policy shocks to longer-term nominal and real yields. For a given monetary policy shock, the reaction of yields is more pronounced when the level of monetary policy uncertainty is low. Primary dealers and other investors adjust their interest rate positions more when monetary policy uncertainty is low than when uncertainty is high. These portfolio adjustments likely explain the larger pass-through of a monetary policy shock to bond yields when uncertainty is low. These findings shed new light on the role that monetary policy uncertainty plays in the transmission of monetary policy to financial markets.

Keywords: Monetary policy surprises; Monetary policy uncertainty; Interest rates; Primary dealers (search for similar items in EconPapers)
JEL-codes: E40 E50 G10 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2020-04-17
New Economics Papers: this item is included in nep-cba, nep-gen, nep-mac, nep-mon and nep-ore
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2020032pap.pdf (application/pdf)

Related works:
Journal Article: Monetary policy uncertainty and monetary policy surprises (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-32

DOI: 10.17016/FEDS.2020.032

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().