Unconventional Monetary Policies and Expectations on Economic Variables

42 Pages Posted: 25 May 2021

Date Written: March 16, 2021

Abstract

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

Anzuini, Alessio and Rossi, Luca, Unconventional Monetary Policies and Expectations on Economic Variables (March 16, 2021). Bank of Italy Temi di Discussione (Working Paper) No. 1323, Available at SSRN: https://ssrn.com/abstract=3852360 or http://dx.doi.org/10.2139/ssrn.3852360

Alessio Anzuini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Luca Rossi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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