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Market-based monetary policy uncertainty
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Bauer, Michael D., Lakdawala, Aeimit and Mueller, Philippe (2022) Market-based monetary policy uncertainty. The Economic Journal . ueab086. doi:10.1093/ej/ueab086 ISSN 0013-0133.
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WRAP-Market-based-monetary-policy-uncertainty-Mueller-2022.pdf - Accepted Version - Requires a PDF viewer. Download (823Kb) | Preview |
Official URL: https://doi.org/10.1093/ej/ueab086
Abstract
Uncertainty about future policy rates plays a crucial role for the transmission of monetary policy to financial markets. We demonstrate this using event studies of FOMC announcements and a new model-free uncertainty measure based on derivatives. Over the ‘FOMC uncertainty cycle’ announcements systematically resolve uncertainty, which then gradually ramps up again. Changes in monetary policy uncertainty around FOMC announcements—often due to forward guidance—have pronounced effects on asset prices that are distinct from the effects of conventional policy surprises. The level of uncertainty determines the magnitude of financial market reactions to surprises about the path of policy rates.
Item Type: | Journal Article | ||||||||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Monetary policy -- Mathematical models, Monetary policy -- Econometric models, Uncertainty -- Economic aspects | ||||||||||
Journal or Publication Title: | The Economic Journal | ||||||||||
Publisher: | Oxford University Press | ||||||||||
ISSN: | 0013-0133 | ||||||||||
Official Date: | 2022 | ||||||||||
Dates: |
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Number of Pages: | 19 | ||||||||||
Article Number: | ueab086 | ||||||||||
DOI: | 10.1093/ej/ueab086 | ||||||||||
Status: | Peer Reviewed | ||||||||||
Publication Status: | Published | ||||||||||
Reuse Statement (publisher, data, author rights): | This is a pre-copyedited, author-produced version of an article accepted for publication in The Economic Journal following peer review. The version of record Bauer, Michael D., Lakdawala, Aeimit and Mueller, Philippe (2022) Market-based monetary policy uncertainty. The Economic Journal . ueab086. doi:10.1093/ej/ueab086 is available online at: http://dx.doi.org/10.1093/ej/ueab086. | ||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||
Date of first compliant deposit: | 30 March 2022 | ||||||||||
Date of first compliant Open Access: | 3 November 2023 | ||||||||||
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