Monetary Policy Uncertainty and Economic Fluctuations / Drew D. Creal, Jing Cynthia Wu.

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Creal, Drew D

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w20594.Publication details: Cambridge, Mass. National Bureau of Economic Research 2014.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We investigate the relationship between uncertainty about monetary policy and its transmission mechanism, and economic fluctuations. We propose a new term structure model where the second moments of macroeconomic variables and yields can have a first-order effect on their dynamics. The data favors a model with two unspanned volatility factors that capture uncertainty about monetary policy and the term premium. Uncertainty contributes negatively to economic activity. Two dimensions of uncertainty react in opposite directions to a shock to the real economy, and the response of inflation to uncertainty shocks vary across different historical episodes.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w20594 (Browse shelf(Opens below))	Not For Loan

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October 2014.

We investigate the relationship between uncertainty about monetary policy and its transmission mechanism, and economic fluctuations. We propose a new term structure model where the second moments of macroeconomic variables and yields can have a first-order effect on their dynamics. The data favors a model with two unspanned volatility factors that capture uncertainty about monetary policy and the term premium. Uncertainty contributes negatively to economic activity. Two dimensions of uncertainty react in opposite directions to a shock to the real economy, and the response of inflation to uncertainty shocks vary across different historical episodes.