{
  "title": "Has the Transmission of US Monetary Policy Changed Since 2022?",
  "publication": "IMF Working Papers, June 21, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2024/06/21/has-the-transmission-of-us-monetary-policy-changed-since-2022-550898",
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  "summary": "Activity and inflation responded slowly to the Federal Reserve’s rate hikes in 2022. Was this because the transmission of monetary policy had changed? Or did other shocks offset tighter policy?",
  "sections": [
    {
      "heading": "Research question and approach",
      "content": "- Question: Did the transmission of US monetary policy change since 2022, or did other shocks offset tighter policy?\n- Data and method:\n  - Use pre-pandemic data to estimate a VAR with monetary policy shocks identified from high-frequency data.\n  - Use the estimated VAR as a filter to back out the sequence of monetary policy shocks consistent with data since 2022.\n  - Compare the implied shocks to the actual shocks."
    },
    {
      "heading": "Key empirical findings",
      "content": "- Activity and inflation responded slowly to the Federal Reserve’s rate hikes in 2022.\n- The difference between implied and actual shocks is statistically significant during February-July 2022.\n- These differences imply monetary transmission was around 25 percent weaker than normal.\n- Allowing other shocks to change to match the post-COVID covariance of the data produces similar results but in a shorter period.\n- Decomposition of uncertainty in the estimate finds that colinearity of shocks is generally more important than uncertainty over model parameters.\n- Extension to central bank information shocks finds Federal Reserve communication was less powerful than usual during 2021."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: COVID-19; Data processing; Econometric analysis; Economic and financial statistics; Health; Inflation; Labor; Labor markets; Prices; Vector autoregression\n- Keywords: COVID-19; Data processing; Federal Reserve communication; Filtering; Global; Inflation; Labor markets; Monetary Policy; monetary policy shock; pandemic data; rate hike; Semi-structural Identification; transmission of monetary policy; VAR; Vector autoregression\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/06/21/has-the-transmission-of-us-monetary-policy-changed-since-2022-550898"
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    "Authors: Philip Barrett, Josef Platzer",
    "Published: June 21, 2024",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400281051.001",
    "Question: Did the transmission of US monetary policy change since 2022, or did other shocks offset tighter policy?",
    "Data and method:",
    "Activity and inflation responded slowly to the Federal Reserve’s rate hikes in 2022.",
    "The difference between implied and actual shocks is statistically significant during February-July 2022.",
    "These differences imply monetary transmission was around 25 percent weaker than normal.",
    "Allowing other shocks to change to match the post-COVID covariance of the data produces similar results but in a shorter period.",
    "Decomposition of uncertainty in the estimate finds that colinearity of shocks is generally more important than uncertainty over model parameters.",
    "Extension to central bank information shocks finds Federal Reserve communication was less powerful than usual during 2021.",
    "Subject: COVID-19; Data processing; Econometric analysis; Economic and financial statistics; Health; Inflation; Labor; Labor markets; Prices; Vector autoregression",
    "Keywords: COVID-19; Data processing; Federal Reserve communication; Filtering; Global; Inflation; Labor markets; Monetary Policy; monetary policy shock; pandemic data; rate hike; Semi-structural Identification; transmission of monetary policy; VAR; Vector autoregression",
    "**Working Paper**"
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