Signaling effects of monetary policy

No WP-2012-05, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: We develop a DSGE model in which the policy rate signals the central bank's view about macroeconomic developments to incompletely informed price setters. The model is estimated with likelihood methods on a U.S. data set including the Survey of Professional Forecasters as a measure of price setters' expectations. The signaling effects of monetary policy are found to be empirically important and dampen the effects of monetary disturbances on inflation. While the signaling effects enhance the Federal Reserve's ability to stabilize the economy in the face of demand shocks, they play a small role in stabilizing the economy after technology shocks.

Keywords: Monetary policy; Federal Reserve System; Technology - Economic aspects (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Signalling Effects of Monetary Policy (2017)
Working Paper: Signaling Effects of Monetary Policy (2016)
Working Paper: Signaling Effects of Monetary Policy (2013)
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