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Do Monetary Policy Announcements Shift Household Expectations?
We use a decade of daily survey data from Gallup to study how monetary policy influences households’ beliefs about economic conditions. We first document that public confidence in the state of the economy reacts instantaneously to certain types of macroeconomic news. Next, we show that surprises to the federal funds target rate are among the news that have statistically significant and instantaneous effects on economic confidence. Specifically, we find that a surprise increase in the target rate robustly leads to an immediate decline in household confidence, at odds with previous findings ...
Report
Announcement-Specific Decompositions of Unconventional Monetary Policy Shocks and Their Macroeconomic Effects
I propose to identify announcement-specific decompositions of asset price changes into monetary policy shocks exploiting heteroskedasticity in intraday data. This approach accommodates 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, asset purchase, and Fed information shocks for 2007-19. Only a handful of announcements spark significant shocks. Both forward guidance and asset purchase shocks lower corporate yields and ...