The Low-Frequency Impact of Daily Monetary Policy Shocks

Federal Reserve Bank of St. Louis Working Paper Series 2011-009B

29 Pages Posted: 28 Mar 2011 Last revised: 18 Sep 2012

See all articles by Neville Francis

Neville Francis

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Multiple version iconThere are 2 versions of this paper

Date Written: April 19, 2011

Abstract

With rare exception, studies of monetary policy tend to neglect the timing of innovations to monetary policy instruments. Models which take timing seriously are often difficult to compare to standard monetary VARs because each uses different frequencies. We propose using MIDAS regressions that nests both ideas: Accurate (daily) timing of innovations to policy are embedded in a monthly-frequency VAR to determine the macroeconomic effects of high-frequency policy shocks. We find that policy have greatest effects on variables thought of as heavily expectations oriented and that, contrary to some VAR studies, the effects of policy shocks on real variables are small.

Keywords: monetary policy, daily fed funds rate, price puzzle, mixed data frequencies

JEL Classification: C32, C50, E32

Suggested Citation

Francis, Neville and Ghysels, Eric and Owyang, Michael T., The Low-Frequency Impact of Daily Monetary Policy Shocks (April 19, 2011). Federal Reserve Bank of St. Louis Working Paper Series 2011-009B, Available at SSRN: https://ssrn.com/abstract=1793358 or http://dx.doi.org/10.2139/ssrn.1793358

Neville Francis

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

Eric Ghysels

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

Michael T. Owyang (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

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