Unconventional Monetary Policy Shocks in OECD Countries: How Important is the Extent of Policy Uncertainty?

Rangan Gupta and Charl Jooste

No 201587, Working Papers from University of Pretoria, Department of Economics

Abstract: We study the effects of unconventional monetary policy shocks on output, inflation and uncertainty using a sign restricted panel VAR over the monthly period of 2008:1-2015:1. Our sample includes primarily OECD countries (Canada, Germany, France, Italy, Japan, Spain, UK and US) that reached the interest rate zero lower bound in response to the recent financial crisis. Central bank balance sheets are used to gauge the size of unconventional monetary policy reactions to the crisis. We control for the degree of uncertainty by estimating the economic response to balance sheet shocks in two economic states: high versus low uncertainty. We use sign restrictions to identify our shocks, but remain agnostic regarding price and output responses to balance sheet shocks. We show that the mean group response of prices and output increases in response to monetary policy. The results, however, vary by country and are sensitive to the degree of uncertainty. Prices and output do not necessarily increase uniformly across countries.

Keywords: Unconventional monetary policy; Economic policy uncertainty; Macroeconomic effects; OECD countries (search for similar items in EconPapers)
JEL-codes: C33 E58 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2015-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Journal Article: Unconventional monetary policy shocks in OECD countries: how important is the extent of policy uncertainty? (2018)
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