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Monetary policy shocks: We got news!

Author

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  • Sandra Gomes
  • Nikolay Iskrev
  • Caterina Mendicino

Abstract

We augment a medium-scale DSGE model with monetary policy news shocks and t it to US data. Monetary policy news shocks improve the performance of the model both in terms of marginal data density and in terms of its ability to match the empirical moments of the variables used as observables. We estimate several versions of the model and nd that the one with news shocks over a two-quarter horizon dominates in terms of overall goodness of t. We show that, in the estimated model: (1) adding monetary policy news shocks to the model does not lead to identi cation problems; (2) monetary policy news shocks account for a larger fraction of the unconditional variance of the observables than the standard unanticipated monetary policy shock; (3) these news shocks also help to achieve a better matching of the covariances of consumption growth and the interest rate.

Suggested Citation

  • Sandra Gomes & Nikolay Iskrev & Caterina Mendicino, 2013. "Monetary policy shocks: We got news!," Working Papers w201307, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w201307
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    References listed on IDEAS

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    Cited by:

    1. Sandra Gomes & Caterina Mendicino, 2011. "Housing Market Dynamics: Any News?," Working Papers w201121, Banco de Portugal, Economics and Research Department.
    2. Nadav Ben Zeev & Christopher M. Gunn & Hashmat Khan, 2015. "Monetary News Shocks," Carleton Economic Papers 15-02, Carleton University, Department of Economics, revised 17 Feb 2017.
    3. Kenichi Tamegawa, 2014. "A closed-form analysis of anticipated monetary policy," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 15(2), pages 155-161.

    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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