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Estimating the Fed’s unconventional policy shocks

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  • Jarociński, Marek

Abstract

Financial market responses to Fed monetary policy announcements are often very small, but sometimes very large and the mix of news contained in these announcements varies over time. I exploit these features of the data to estimate different types of Fed policy shocks. The resulting shocks can be naturally labeled as standard monetary policy, Odyssean forward guidance, large scale asset purchases and Delphic forward guidance. They affect risk-free interest rates, stock prices and the dollar on impact and have delayed but pronounced effects on corporate bond spreads and breakeven inflation rates.

Suggested Citation

  • Jarociński, Marek, 2024. "Estimating the Fed’s unconventional policy shocks," Journal of Monetary Economics, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:moneco:v:144:y:2024:i:c:s0304393224000011
    DOI: 10.1016/j.jmoneco.2024.01.001
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    More about this item

    Keywords

    High-frequency identification; Non-Gaussianity; Fat tails; Forward guidance; Asset purchases;
    All these keywords.

    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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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