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Estimating the Fed’s Unconventional Policy Shocks

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  • Jarociński, Marek

Abstract

Fed monetary policy announcements convey a mix of news about different conventional and unconventional policies, and about the economy. Financial market responses to these announcements are usually very small, but sometimes very large. I estimate the underlying structural shocks exploiting this feature of the data, both assuming that the structural shocks are independent and relaxing this assumption. Either approach yields the same tightly estimated shocks that can be naturally labelled as standard monetary policy, Odyssean forward guidance, large scale asset purchases and Delphic forward guidance. JEL Classification: E52, E58, E44

Suggested Citation

  • Jarociński, Marek, 2021. "Estimating the Fed’s Unconventional Policy Shocks," Working Paper Series 20210, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20210
    Note: 400529
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    References listed on IDEAS

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    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
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    6. Leonardo Melosi, 2017. "Signalling Effects of Monetary Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(2), pages 853-884.
    7. Cieslak, Anna & Schrimpf, Andreas, 2019. "Non-monetary news in central bank communication," Journal of International Economics, Elsevier, vol. 118(C), pages 293-315.
    8. Jeffrey R. Campbell & Charles L. Evans & Jonas D.M. Fisher & Alejandro Justiniano, 2012. "Macroeconomic Effects of Federal Reserve Forward Guidance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(1 (Spring), pages 1-80.
    9. Daniel J. Lewis, 2019. "Announcement-Specific Decompositions of Unconventional Monetary Policy Shocks and Their Macroeconomic Effects," Staff Reports 891, Federal Reserve Bank of New York.
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    Cited by:

    1. Jung, Alexander, 2023. "US monetary policy spillovers to European banks," Working Paper Series 2876, European Central Bank.

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    More about this item

    Keywords

    Asset purchases; Excess kurtosis; Forward guidance; High-frequency identification; Non-Gaussianity;
    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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