The Effects of Monetary Policy and Other Announcements

Chao Gu, Han Han and Randall Wright
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Han Han: School of Economics, Peking University

No 1621, Working Papers from Department of Economics, University of Missouri

Abstract: We analyze the impact of news (information shocks) in economies where liquidity plays a role. While we also consider news about real factors, like productivity, one motivation is that central bank announcements evidently affect markets, as taken for granted by advocates of forward guidance policy. The dynamic effects can be complicated, with information about monetary policy or real factors affecting markets for goods, equity, housing, credit and foreign exchange. Even news about neutral policy can induce cyclic or boom-bust responses. More generally, we show that central bank announcements can induce rather than reduce volatility, and might increase or decrease welfare.

Keywords: Announcements; Monetary Policy; News; Dynamics (search for similar items in EconPapers)
JEL-codes: D53 D83 E30 E44 E52 G14 (search for similar items in EconPapers)
Pages: 48 pgs.
Date: 2016-12-02
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1621

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