Announcement-Specific Decompositions of Unconventional Monetary Policy Shocks and Their Macroeconomic Effects

43 Pages Posted: 27 Jun 2019 Last revised: 22 Oct 2019

See all articles by Daniel J. Lewis

Daniel J. Lewis

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: June 1, 2019

Abstract

I propose to identify announcement-specific decompositions of asset price changes into monetary policy shocks using intraday time-varying volatility. This approach is the first to accommodate both changes in the nature of shocks and the state of the economy across announcements, allowing me to explicitly compare shocks across announcements. I compute decompositions with respect to fed funds, forward guidance, and asset purchase shocks for 2007-18. Only a handful of announcements spark significant shocks. Asset purchase shocks lower corporate borrowing costs; both asset purchases and forward guidance increase spreads. Asset purchase shocks have significant expansionary effects on inflation and GDP growth.

Keywords: high-frequency identification, time-varying volatility, monetary policy shocks, forward guidance, quantitative easing

JEL Classification: C32, C58, E44, E52, E58

Suggested Citation

Lewis, Daniel J., Announcement-Specific Decompositions of Unconventional Monetary Policy Shocks and Their Macroeconomic Effects (June 1, 2019). FRB of New York Staff Report No. 891, June 2019, Available at SSRN: https://ssrn.com/abstract=3409980 or http://dx.doi.org/10.2139/ssrn.3409980

Daniel J. Lewis (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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