Monetary Policy Surprises, Credit Costs, and Economic Activity

American Economic Journal: Macroeconomics, 2015, vol. 7, issue 1, 44-76

Abstract: We provide evidence on the transmission of monetary policy shocks in a setting with both economic and financial variables. We first show that shocks identified using high frequency surprises around policy announcements as external instruments produce responses in output and inflation that are typical in monetary VAR analysis. We also find, however, that the resulting "modest" movements in short rates lead to "large" movements in credit costs, which are due mainly to the reaction of both term premia and credit spreads. Finally, we show that forward guidance is important to the overall strength of policy transmission. (JEL E31, E32, E43, E44, E52, G01)

JEL-codes: E31 E32 E43 E44 E52 G01 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mac.20130329
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Related works:
Working Paper: Monetary Policy Surprises, Credit Costs, and Economic Activity (2015)
Working Paper: Monetary Policy Surprises, Credit Costs and Economic Activity (2014)
Working Paper: Monetary Policy Surprises, Credit Costs and Economic Activity (2014)
Chapter: Monetary Policy Surprises, Credit Costs and Economic Activity (2013)
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