The Final Countdown: The Effect of Monetary Policy During 'Wait-for-It' and Reversal Periods

40 Pages Posted: 28 Jan 2016

See all articles by Ali K. Ozdagli

Ali K. Ozdagli

Federal Reserve Banks - Federal Reserve Bank of Dallas

Date Written: 2015-09-01

Abstract

After a long period of loose monetary policy triggered by the Great Recession, some central banks are signaling that they will raise their policy rates soon. Previous research, for example, Bernanke and Kuttner (2005) and Ozdagli (2014), has shown that asset prices react more strongly to monetary policy target surprises on the dates of such a policy reversal announcement. However, we know very little about the channels that generate these effects and whether the cross-sectional differences among firms and sectors play a significant role in transmitting a reversal decision to the economy, a question of primary interest for investors and policymakers.

Keywords: monetary policy, stock prices, liftoff, gradualism, forward guidance

JEL Classification: E44, E52, E58

Suggested Citation

Ozdagli, Ali K., The Final Countdown: The Effect of Monetary Policy During 'Wait-for-It' and Reversal Periods (2015-09-01). FRB of Boston Working Paper No. 15-15, Available at SSRN: https://ssrn.com/abstract=2723767

Ali K. Ozdagli (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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