Announcement-Specific Decompositions of Unconventional Monetary Policy Shocks and Their Macroeconomic Effects
AbstractI propose to identify announcement-specific decompositions of asset price changes
into monetary policy shocks using intraday time-varying volatility. This approach is the
first to accommodate both changes in the nature of shocks and the state of the economy
across announcements, allowing me to explicitly compare shocks across announcements.
I compute decompositions with respect to Fed Funds, forward guidance, and asset purchase
shocks for 2007-2018. Only a handful of announcements spark significant shocks.
Asset purchase shocks lower corporate borrowing costs; both asset purchases and forward
guidance increase spreads. Asset purchase shocks have significant expansionary
effects on inflation and GDP growth.