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Noisy monetary policy announcements

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  • Tatjana Dahlhaus
  • Luca Gambetti

Abstract

We address two main questions. First, do monetary policy announcements contain noise? Second, if yes, what are the effects of policy noise on the economy? The answer to the first question is “yes.” The answer to the second is “small,” except on federal funds rate expectations. In sum, we find that the bulk of fluctuations in the path factor are driven by noise. The results are obtained using dynamic rotations to identify the monetary policy shock in a VAR estimated with US data. Finally, we show that announcements about future tightening are mainly interpreted as Delphic over our sample period.

Suggested Citation

  • Tatjana Dahlhaus & Luca Gambetti, 2025. "Noisy monetary policy announcements," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 40(2), pages 164-180, March.
    • Handle: RePEc:wly:japmet:v:40:y:2025:i:2:p:164-180
    DOI: 10.1002/jae.3090
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    References listed on IDEAS

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