Cardiff University | Prifysgol Caerdydd ORCA
Online Research @ Cardiff 
WelshClear Cookie - decide language by browser settings

Dynamic effects of monetary policy shocks on macroeconomic volatility

Mumtaz, Haroon and Theodoridis, Konstantinos ORCID: https://orcid.org/0000-0002-4039-3895 2020. Dynamic effects of monetary policy shocks on macroeconomic volatility. Journal of Monetary Economics 114 , pp. 262-282. 10.1016/j.jmoneco.2019.03.011

[thumbnail of manuscriptJME.pdf]
Preview
PDF - Accepted Post-Print Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (1MB) | Preview

Abstract

We develop a VAR that allows the estimation of the impact of monetary policy shocks on volatility. Estimates for the US suggest that an increase in the policy rate by 1% is associated with a rise in unemployment and inflation volatility of about 15%. Using a New Keynesian model, with search and matching labour frictions and Epstein-Zin preferences we show that these volatility effects are driven by the coexistence of agents’ fears of unemployment and concerns about the (in) ability of the monetary authority to reverse deviations from the policy rule with the impact magnified by the agents’ preferences.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0304-3932
Date of First Compliant Deposit: 22 March 2019
Date of Acceptance: 26 March 2019
Last Modified: 06 Nov 2023 14:32
URI: https://orca.cardiff.ac.uk/id/eprint/121043

Citation Data

Cited 20 times in Scopus. View in Scopus. Powered By Scopus® Data

Actions (repository staff only)

Edit Item Edit Item

Downloads

Downloads per month over past year

View more statistics