"The Perceived Causes of Monetary Policy Surprises"
Miguel Acosta (Federal Reserve Board)
November 18, 2022, 3:30 to 5:00 PM
Host: Francisco Ruge-Murcia
I estimate the macroeconomic effects of two central aspects of Federal Reserve (Fed) communications—interest-rate forward guidance and macroeconomic information provision—using newly identified shocks to each aspect of policy. The shocks are based on a new measure of high-frequency GDP forecast revisions that I construct from the text of newspaper articles. I recover the shocks from a model of how Fed announcements determine interest-rate and GDP expectations, identified with a discrete change in Fed communication policy: the introduction of interest-rate forward guidance. The estimated effects of monetary policy and information provision are large, robust, and consistent with macroeconomic theory.