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High-Frequency Identification of Monetary Non-Neutrality: The Information Effect*

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Nakamura, Emi, Steinsson, Jón·2018·The Quarterly Journal of Economics
DOI 10.1093/qje/qjy004
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Abstract

We present estimates of monetary non-neutrality based on evidence from high-frequency responses of real interest rates, expected inflation, and expected output growth.Our identifying assumption is that unexpected changes in interest rates in a 30-minute window surrounding scheduled Federal Reserve announcements arise from news about monetary policy.In response to an interest rate hike, nominal and real interest rates increase roughly one-for-one, several years out into the term structure, while the response of expected inflation is small.At the same time, forecasts about output growth also increase-the opposite of what standard models imply about a monetary tightening.To explain these facts, we build a model in which Fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals.Our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output.

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Metadata

Authors
Nakamura, E., & Steinsson, J.
Venue
The Quarterly Journal of Economics
Publisher
Oxford University Press (OUP)
Published
2018-01-29
Volume
133
Issue
3
Pages
1283-1330
ISSN
  • 0033-5533 (ISSN-L)
  • 1531-4650
DOI
10.1093/qje/qjy004
OpenAlex
W2553269777
Cited by
1,405
References
0
FWCI
32.25
Type
journal article
Language
en
Open access
green
Licence
academic.oup.com/journals/pages/about_us/legal/notices (vor)

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Nakamura, E., & Steinsson, J. (2018). High-Frequency Identification of Monetary Non-Neutrality: The Information Effect*. The Quarterly Journal of Economics. https://doi.org/10.1093/qje/qjy004

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