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The Effect of News Shocks and Monetary Policy

Gambetti, Luca and Korobilis, Dimitris and Tsoukalas, John D and Zanetti, Francesco The Effect of News Shocks and Monetary Policy. UNSPECIFIED. UNSPECIFIED.

GKTZ_2017.09_final_v1.pdf - Published Version

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A VAR model estimated on U.S. data before and after 1980 documents systematic differences in the response of short- and long-term interest rates, corporate bond spreads and durable spending to news TFP shocks. Interest rates across the maturity spectrum broadly increase in the pre-1980s and broadly decline in the post-1980s. Corporate bond spreads decline significantly, and durable spending rises significantly in the post-1980 period while the opposite short-run response is observed in the pre-1980 period. Measuring expectations of future monetary policy rates conditional on a news shock suggests that the Federal Reserve has adopted a restrictive stance before the 1980s with the goal of retaining control over inflation while adopting a neutral/ accommodative stance in the post-1980 period.

Item Type: Monograph (UNSPECIFIED)
Uncontrolled Keywords: E20, E32, E43, E52., news shocks, business cycles, VAR models, DSGE models.
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 27 Sep 2017 11:34
Last Modified: 07 Aug 2019 21:15

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