Monetary policy uncertainty and firm dynamics

Fasani, Stefano; Mumtaz, Haroon; Rossi, Lorenza

doi:10.1016/j.red.2022.02.002

Cited by 15 publications

(5 citation statements)

References 76 publications

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“…As documented in the following section, our identified financial uncertainty shocks are not significantly correlated with proxies of different shocks recently proposed by the literature. We see this evidence as consistent with our instruments' ability to pin down the business cycle effects of the financial uncertainty shocks we are after.19 For other recent papers identifying uncertainty shocks with a proxy-VAR approach, seeStock and Watson (2012),Alessandri et al (2020), andFasani et al (2022). The first paper employs two different instruments(Bloom, 2009 on financial volatility plus an instruments for economic policy uncertainty), whereasFasani et al (2022) propose instruments for monetary policy uncertainty.…”

supporting

confidence: 81%

“…We see this evidence as consistent with our instruments' ability to pin down the business cycle effects of the financial uncertainty shocks we are after.19 For other recent papers identifying uncertainty shocks with a proxy-VAR approach, seeStock and Watson (2012),Alessandri et al (2020), andFasani et al (2022). The first paper employs two different instruments(Bloom, 2009 on financial volatility plus an instruments for economic policy uncertainty), whereasFasani et al (2022) propose instruments for monetary policy uncertainty. Given that our focus is on financial uncertainty, we use Bloom's (plus the one byPiffer and Podstawski, 2018) Alessandri et al (2020).…”

supporting

confidence: 81%

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Uncertainty and Monetary Policy During the Great Recession

Pellegrino

Castelnuovo

Caggiano

2022

Int Economic Review

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We employ a nonlinear VAR framework and a state-of-the-art identi…cation strategy to document the large response of real activity to a …nancial uncertainty shock during and in the aftermath of the great recession. We replicate this evidence with an estimated DSGE framework featuring a concept of uncertainty comparable to that in our VAR. We then use the estimated framework to quantify the output loss due to the large uncertainty shock that materialized in 2008Q3. We …nd such a shock to be able to explain about 60% of the output loss in the 2008-2014 period. The same estimated model unveils the role successfully played by the Federal Reserve in limiting the output loss that would otherwise have occurred had monetary policy been conducted as in normal times. Finally, we show that the rule estimated during the great recession is able to deliver an economic outcome closer to the ‡exible price one than the rule describing the Federal Reserve's conduct in normal times.

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supporting

confidence: 81%

supporting

confidence: 81%

Uncertainty and Monetary Policy During the Great Recession

Pellegrino

Castelnuovo

Caggiano

2022

Int Economic Review

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“…Fasani et al. ( 2022 ) employ a proxy‐FAVAR framework to estimate the business cycle effects of monetary policy uncertainty shocks. As instrument, they employ the residual from the regression of the conditional volatility of 1‐year swap rate 1‐month ahead taken by Carlston and Ochoa ( 2016 ) over monetary policy surprises on FOMC meeting days.…”

Section: Domestic Uncertainty: Ten Takeawaysmentioning

confidence: 99%

“…To the extent that monetary (and fiscal) policy moves are influenced by business cycle shocks, these findings are consistent with those in Caldara et al (2021b), who find that a business cycle shock can importantly affect uncertainty and risk. Fasani et al (2022) employ a proxy-FAVAR framework to estimate the business cycle effects of monetary policy uncertainty shocks. As instrument, they employ the residual from the regression of the conditional volatility of 1-year swap rate 1-month ahead taken by Carlston and Ochoa (2016) over monetary policy surprises on FOMC meeting days.…”

Section: Macroeconomic Policies Can Generate Uncertaintymentioning

confidence: 99%

Uncertainty before and during COVID‐19: A survey

Castelnuovo

2022

Journal of Economic Surveys

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This survey features three parts. The first one reviews the most recent literature on the relationship between domestic (i.e., country‐specific) uncertainty and the business cycle, and offers ten main takeaways. The second part surveys contributions to the fast‐growing strand of the literature that focuses on the macroeconomic effects of uncertainty spillovers and global uncertainty. The last part presents contributions on the role played by uncertainty during the COVID‐19 pandemic.

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“…Finally,Johri et al (2022) use the time-varying volatility of the world's interest rates.Recently,Bauer et al (2022) gauged uncertainty regarding future short-term interest rates using a model-free measure derived from Eurodollar futures and options prices. Building onHusted et al's (2020) measure of monetary policy uncertainty about future short-term interest rates,Fasani et al (2023) explored the potential outcomes of future monetary policy uncertainty on firms' decisions to enter or exit the market.…”

mentioning

confidence: 99%

Interest rate uncertainty and the shape of the yield curve of U.S. treasury bonds

Bayaa,

Qadan

2024

Eurasian Econ Rev

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We decompose the yield curve of U.S. Treasury bonds into three components—the level, slope, and curvature. We then explore the interaction between these factors and uncertainty in the U.S. bond market. We assess this uncertainty using a VIX-style estimate originating in options on the CBOE’s Treasury Note futures. Using monthly data for 2003–2020, we find that interest rate uncertainty drives the evolution in the shape of the yield curve, but not vice versa. Specifically, the bond market’s VIX-style metric not only correlates with but also influences the yield curve’s level and slope. Moreover, increased uncertainty about interest rates is negatively associated with, and can significantly influence, the yield curve’s curvature. The results of this study are crucial for both policymakers and money managers.

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Monetary policy uncertainty and firm dynamics

Cited by 15 publications

References 76 publications

Uncertainty and Monetary Policy During the Great Recession

Uncertainty and Monetary Policy During the Great Recession

Uncertainty before and during COVID‐19: A survey

Interest rate uncertainty and the shape of the yield curve of U.S. treasury bonds

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