Fluctuations in Economic Uncertainty and Transmission of Monetary Policy Shocks: Evidence Using Daily Surveys from Brazil

64 Pages Posted: 12 Nov 2019

See all articles by Rafael Burjack

Rafael Burjack

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Ritong Qu

University of California, San Diego (UCSD) - Rady School of Management

Allan Timmermann

University of California, San Diego (UCSD) - Rady School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2019

Abstract

We use a unique Brazilian dataset on daily survey expectations to obtain direct measures of shocks to central bank target rates and changes in economic uncertainty. Using these measures, we gauge the effect of monetary policy shocks on economic uncertainty, term premia, inflation expectations, and bond yields in Brazil. We find strong evidence that inflation uncertainty is key to transmitting monetary policy shocks to the yield curve via time-varying term premia. Finally, Fed announcements have sizeable spillover effects on the Brazilian bond market, as positive shocks to US yields significantly raise term premia in Brazil through elevated exchange rate risk.

Keywords: Monetary policy transmission; Economic uncertainty; Term premia

JEL Classification: E31, E43, E44, E52, G12, G15

Suggested Citation

Burjack, Rafael and Qu, Ritong and Timmermann, Allan, Fluctuations in Economic Uncertainty and Transmission of Monetary Policy Shocks: Evidence Using Daily Surveys from Brazil (November 1, 2019). Available at SSRN: https://ssrn.com/abstract=3479470 or http://dx.doi.org/10.2139/ssrn.3479470

Rafael Burjack

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil

Ritong Qu (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Allan Timmermann

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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