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Announcement-Specific Decompositions of Unconventional Monetary Policy Shocks and Their Macroeconomic Effects

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  • Daniel J. Lewis

Abstract

I propose to identify announcement-specific decompositions of asset price changes into monetary policy shocks using intraday time-varying volatility. This approach is the first to accommodate both changes in the nature of shocks and the state of the economy across announcements, allowing me to explicitly compare shocks across announcements. I compute decompositions with respect to fed funds, forward guidance, and asset purchase shocks for 2007-18. Only a handful of announcements spark significant shocks. Asset purchase shocks lower corporate borrowing costs; both asset purchases and forward guidance increase spreads. Asset purchase shocks have significant expansionary effects on inflation and GDP growth.

Suggested Citation

  • 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.
  • Handle: RePEc:fip:fednsr:891
    Note: Revised October 2019.
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    References listed on IDEAS

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    Cited by:

    1. Daniel J. Lewis & Christos Makridis & Karel Mertens, 2019. "Do Monetary Policy Announcements Shift Household Expectations?," Working Papers 1906, Federal Reserve Bank of Dallas, revised 17 Jan 2020.

    More about this item

    Keywords

    high-frequency identification; time-varying volatility; monetary policy shocks; forward guidance; quantitative easing;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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