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Monetary Policy Shocks: Data or Methods?

Author

Listed:
  • Brennan Connor M.

    (University of Chicago, 5757 S University Ave, Chicago, IL, 60637, USA)

  • Jacobson Margaret M.

    (1378 Federal Reserve Board , 20th and Constitution, Washington, DC, 20551, USA)

  • Matthes Christian

    (Department of Economics, University of Notre Dame, Jenkins-Nanovic Hall, Notre Dame, IN, 46556, USA)

  • Walker Todd B.

    (Department of Economics, Indiana University, 100 S Woodlawn Ave, Bloomington, IN, 47405, USA)

Abstract

Different series of high-frequency monetary shocks can have a correlation coefficient as low as 0.3 and the same sign in only one half of observations. Both data and methods drive these differences, which are starkest when the federal funds rate is at its effective lower bound. After documenting differences in monetary shock series, we explore their consequences for inference in several specifications. We find that empirical estimates of monetary policy transmission have few qualitative differences. We caution that inference may not be entirely robust to all shock constructions because qualitative differences can emerge when data and methods are interchanged.

Suggested Citation

  • Brennan Connor M. & Jacobson Margaret M. & Matthes Christian & Walker Todd B., 2025. "Monetary Policy Shocks: Data or Methods?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 25(2), pages 595-659.
    • Handle: RePEc:bpj:bejmac:v:25:y:2025:i:2:p:595-659:n:1009
    DOI: 10.1515/bejm-2024-0175
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    Cited by:

    1. Miguel Acosta & Andrea Ajello & Michael D. Bauer & Francesca Loria & Silvia Miranda-Agrippino, 2025. "Financial Market Effects of FOMC Communication: Evidence from a New Event-Study Database," Working Paper Series 2025-30, Federal Reserve Bank of San Francisco.
    2. Efrem Castelnuovo & Giovanni Pellegrino & Laust L. Saerkjaer, 2025. "Monetary Policy Shocks and Narrative Restrictions: Rules Matter," "Marco Fanno" Working Papers 0328, Dipartimento di Scienze Economiche "Marco Fanno".
    3. Liyu Dou & Paul Ho & Thomas A. Lubik, 2023. "Max-Share Misidentification," Working Paper 25-02, Federal Reserve Bank of Richmond.
    4. Acosta, Miguel & Brennan, Connor M. & Jacobson, Margaret M., 2024. "Constructing high-frequency monetary policy surprises from SOFR futures," Economics Letters, Elsevier, vol. 242(C).
    5. Jiaming Huang & Luca Neri, 2026. "Beyond Validity: SVAR Identification Through the Proxy Zoo," Papers 2601.11195, arXiv.org.
    6. Shi, Jiping, 2025. "News Uncertainty and Signaling Effects of Monetary Policy," Warwick-Monash Economics Student Papers 81, Warwick Monash Economics Student Papers.

    More about this item

    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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