Monetary policy uncertainty

By Lucas Husted, J. Rogers, Bo Sun. Journal of Monetary Economics, 2017

388 citations recorded by the source corpus.

We construct new measures of uncertainty about Federal Reserve policy actions and their consequences - monetary policy uncertainty (MPU) indexes. We show that, under a variety of VAR identification schemes, positive shocks to uncertainty about monetary policy robustly raise credit spreads and reduce output. The effects are of comparable magnitude to those of conventional monetary policy shocks. We evaluate the usefulness of our MPU indexes, and examine the influence of Fed communication. Our analysis suggests that policy rate normalization that is accompanied by reduced uncertainty can help neutralize the contractionary effects of the rate increases themselves.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/e6fa77bb8023f23f8cda950f96413bf4e2e70612

Citations in the corpus

• The Voice of Monetary Policy (2021, neutral): “Furthermore, a decrease in policy uncertainty can have a direct positive effect on the economy (e.g., Husted et al., 2020).”