Working Paper

The final countdown: the effect of monetary policy during \"Wait-for-It\" and reversal periods

Abstract: After a long period of loose monetary policy triggered by the Great Recession, some central banks are signaling that they will raise their policy rates soon. Previous research, for example, Bernanke and Kuttner (2005) and Ozdagli (2014), has shown that asset prices react more strongly to monetary policy target surprises on the dates of such a policy reversal announcement. However, we know very little about the channels that generate these effects and whether the cross-sectional differences among firms and sectors play a significant role in transmitting a reversal decision to the economy, a question of primary interest for investors and policymakers.

Keywords: monetary policy; stock prices; liftoff; gradualism; forward guidance;

JEL Classification: E44; E52; E58;

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Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Working Papers

Publication Date: 2015-09-01

Number: 15-15

Pages: 40 pages