Stock Market Uncertainty and Monetary Policy Reaction Functions of the Federal Reserve Bank
AbstractIn this paper, we examine the link between stock market uncertainty and monetary policy in the U.S. There are strong arguments as to why central banks should account for stock market uncertainty in their strategies. Amongst others, they can maintain the functioning of financial markets and moderate economic downswings. To describe the behavior of the Federal Reserve Bank, augmented forward-looking Taylor rules are estimated by GMM. The standard specification is expanded by measures of stock market uncertainty. We show that given certain levels of inflation and output, U.S. central bank rates are significantly lower when stock market uncertainty is high and vice versa. This result is valid for all tested measures of financial uncertainty.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 10 (2010)
Issue (Month): 1 (July)
Contact details of provider:
Web page: http://www.degruyter.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bachmann, Rüdiger & Born, Benjamin & Elstner, Steffen & Grimme, Christian, 2013.
"Time-varying business volatility, price setting, and the real effects of monetary policy,"
01/2013, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
- Ruediger Bachmann & Benjamin Born & Steffen Elstner & Christian Grimme, 2013. "Time-Varying Business Volatility, Price Setting, and the Real Effects of Monetary Policy," NBER Working Papers 19180, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.