IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/20166.html

Decomposing Monetary Policy Surprises: Shock, Information, and Policy Rule Revision

Author

Listed:
  • Ricco, Giovanni
  • Savini, Emanuele

Abstract

Two explanations exist for the output and price puzzles arising from the identification of monetary policy shocks with high-frequency monetary surprises: the 'information channel' and the 'Fed response to news' hypothesis. We argue that the information channel better explains these anomalies, aligns more closely with empirical evidence, and relies on fewer assumptions. Using a model of imperfect information incorporating both monetary policy shocks and policy rule deviations, we derive testable implications to distinguish the two hypotheses. Our findings show that policy rule deviations have minimal impact, while information effects drive the observed puzzles, resolving key inconsistencies in the literature.

Suggested Citation

  • Ricco, Giovanni & Savini, Emanuele, 2025. "Decomposing Monetary Policy Surprises: Shock, Information, and Policy Rule Revision," CEPR Discussion Papers 20166, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20166
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP20166
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:20166. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.