Unconventional Monetary Policies and Expectations on Economic Variables
42 Pages Posted: 25 May 2021
Date Written: March 16, 2021
We investigate whether forward guidance and large scale asset purchases are effective in steering economic expectations in the US. Using the series of monetary policy shocks recovered in Swanson (2020), local projections, and an algorithm to select the best empirical model, we show that unconventional monetary policies are effective in tilting economic expectations in a direction consistent with central bankers' will. Our empirical findings provide two more insights: responses to LSAP shocks are stronger than those following a FG shock; responses to both types of policies are larger after contractionary shocks as compared to expansionary ones.
Keywords: unconventional monetary policy, local projections, non-linearities
JEL Classification: E52, E44, E58
Suggested Citation: Suggested Citation