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The Effects of Monetary Policy and Other Announcements

Listed author(s):
  • Chao Gu

    ()

    (University of Missouri)

  • Han Han

    (School of Economics, Peking University)

  • Randall Wright

    (FRB Chicago, FRB Minneapolis, University of Wisconsin and NBER)

Registered author(s):

We analyze the impact of news (information shocks) in economies where liquidity plays a role. While we also consider news about real factors, like productivity, one motivation is that central bank announcements evidently affect markets, as taken for granted by advocates of forward guidance policy. The dynamic effects can be complicated, with information about monetary policy or real factors affecting markets for goods, equity, housing, credit and foreign exchange. Even news about neutral policy can induce cyclic or boom-bust responses. More generally, we show that central bank announcements can induce rather than reduce volatility, and might increase or decrease welfare.

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File URL: https://economics.missouri.edu/sites/default/files/wp-files/ghw-final.pdf
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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 1621.

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Length: 48 pgs.
Date of creation: 02 Dec 2016
Handle: RePEc:umc:wpaper:1621
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