The macroeconomic effects of forward communication

Brubakk, Leif; Ellen, Saskia ter; Robstad, Ørjan; Hong, Xu

doi:10.1016/j.jimonfin.2021.102536

Cited by 4 publications

(6 citation statements)

References 33 publications

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“…In fact, our results are qualitatively in line with the macroeconomic responses obtained in Brubakk et al. (2019), who analyze the effects of information shocks using Norwegian data and a modified version of the methodology developed by Jarocinski and Karadi (2020).…”

Section: Resultssupporting

confidence: 91%

“…Jarocinski and Karadi (2018), Cieslak and Schrimpf (2018), Nakamura and Steinsson (2018), Andrade and Ferroni (2019)). In fact, our results are also qualitatively in line with the macroeconomic responses obtained in Brubakk et al (2019), who analyze the effects of information shocks, in addition to conventional and forward guidance shocks, on Norwegian data using a modified version of the methodology developed by Jarocinski and Karadi (2018). 15 The common interpretation for this information component is simple: Through its communication the central bank reveals private information about its views on current and future economic conditions.…”

Section: Regression Resultssupporting

confidence: 83%

“…The differences in macroeconomic outcomes between a conventional monetary policy surprise and the narrative surprises speak directly to newer monetary studies emphasizing the information component of monetary policy surprises (see, e.g., Nakamura and Steinsson 2018, Cieslak and Schrimpf 2019, Jarocinski and Karadi 2020, Andrade and Ferroni 2021. In fact, our results are qualitatively in line with the macroeconomic responses obtained in Brubakk et al (2019), who analyze the effects of information shocks using Norwegian data and a modified version of the methodology developed by Jarocinski and Karadi (2020). 11 The common interpretation for this information component is simple: Through its communication, the central bank reveals private information about its views on current and future economic conditions.…”

Section: Macroeconomic Implicationssupporting

confidence: 85%

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Narrative Monetary Policy Surprises and the Media

Ellen¹,

Larsen²,

Thorsrud³

2021

J of Money Credit Banking

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We propose a simple method to quantify narratives from textual data, and identify "narrative monetary policy surprises" as the difference in narrative focus in central bank communication accompanying interest rate meetings and economic media coverage prior to those meetings. Identifying narrative surprises, using Norwegian data, provides surprise measures that are uncorrelated with conventional monetary policy surprises, and, in contrast to such surprises, have a significant effect on subsequent media coverage. Narrative monetary policy surprises lead to macroeconomic responses similar to what recent monetary policy literature associates with the information component of monetary policy communication, highlighting media's role as information intermediaries.

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Section: Resultssupporting

confidence: 91%

Section: Regression Resultssupporting

confidence: 83%

Section: Macroeconomic Implicationssupporting

confidence: 85%

See 1 more Smart Citation

Narrative Monetary Policy Surprises and the Media

Ellen¹,

Larsen²,

Thorsrud³

2021

J of Money Credit Banking

Self Cite

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“…We consider the effects of monetary policy shocks on potential output by using a series of shocks derived by Brubakk et al . (2022) using high frequency financial data around monetary policy meetings. In panel (d) in Figure 4 we present impulse responses to a contractionary monetary policy shock.…”

Section: Evaluation Of Estimated Output Gap Measuresmentioning

confidence: 99%

“…As Blanchard (2018) notes, even monetary policy shocks have an effect on potential output if one assumes in the counterfactual that nominal rigidities are removed only from the date of the shock on, thus taking history as given up to the date of the shock. We consider the effects of monetary policy shocks on potential output by using a series of shocks derived by Brubakk et al (2022) using high frequency financial data around monetary policy meetings. In panel (d) in Figure 4 we present impulse responses to a contractionary monetary policy shock.…”

Section: Cyclical Sensitivitymentioning

confidence: 99%

Norges Bank Output Gap Estimates: Forecasting Properties, Reliability, Cyclical Sensitivity and Hysteresis

Furlanetto

Hagelund²,

Hansen

et al. 2022

Oxf Bull Econ Stat

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This paper documents the suite of models (SoMs) used by Norges Bank to estimate the output gap. The models are estimated using data on GDP, unemployment, inflation, wages, investment, house prices and credit. We evaluate the estimated output gap series in terms of its forecasting properties, its reliability and its cyclical sensitivity to various measures of demand and supply shocks. A simple equally weighted average of estimates from different models features a better forecasting performance than each individual model. In addition, it helps predicting inflation in pseudo real time and exhibits limited variations when new data become available. The summary measure of potential output responds strongly and rapidly to permanent shocks and to narrative measures of technology shocks but, although to a more limited extent, also to demand shocks, thus partly capturing hysteresis effects.JEL Classification numbers: C38, E17, E32. This paper should not be reported as representing the views of Norges Bank. The views expressed are those of the authors and do not necessarily reflect those of Norges Bank. We would like to thank the editor Francesco Zanetti, two anonymous referees and one anonymous referee for the Norges Bank working paper series for constructive comments.

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Measuring Monetary Policy in the Euro Area Using SVARs with Residual Restrictions

Badinger

Schiman

2023

American Economic Journal: Macroeconomics

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This study measures the effects of monetary policy in the euro area using a small number of sign and magnitude restrictions on the residuals of a structural vector autoregression. We derive the dates and directions of these shocks from high-frequency financial market data around official European Central Bank policy announcements. Based on an in-depth narrative analysis and a comparison of the results with those of a standard high-frequency approach, we argue that our approach is purged from central bank information effects. Despite our rather agnostic identification strategy, we find clear and conclusive effects of monetary policy shocks on a wide range of macroeconomic variables. (JEL C32, E43, E44, E52, E58, F33, G14)

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The macroeconomic effects of forward communication

Cited by 4 publications

References 33 publications

Narrative Monetary Policy Surprises and the Media

Narrative Monetary Policy Surprises and the Media

Norges Bank Output Gap Estimates: Forecasting Properties, Reliability, Cyclical Sensitivity and Hysteresis

Measuring Monetary Policy in the Euro Area Using SVARs with Residual Restrictions

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