Measuring the effectiveness of US monetary policy during the Covid‐19 recession

Dados Bibliográficos

ID10493796
AutoresMartin Feldkircher (0000-0002-5511-9215, Vienna School of International Studies (DA) Vienna Austria, autor correspondente), Florian Huber (0000-0002-2896-7921, University of Salzburg Salzburg Austria), Michael Pfarrhofer (0000-0002-0168-688X, University of Salzburg Salzburg Austria)
Ano2021
Volume68
Fascículo3
Páginas287-297
Data de publicação2021-02-08
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoScottish Journal of Political Economy (JOURNAL)
Identificadores do periódicoISSN: 0036-9292 • E-ISSN: 1467-9485
EditoraWiley (PUBLISHER • GB)
DOI10.1111/sjpe.12275
PMID33821043
OpenAlexW3045603160
IdiomaEN
Citações recebidas2
Referências citadas17

The COVID-19 recession that started in March 2020 led to an unprecedented decline in economic activity across the globe. To fight this recession, policy makers in central banks engaged in expansionary monetary policy. This paper asks whether the measures adopted by the US Federal Reserve (Fed) have been effective in boosting real activity and calming financial markets. To measure these effects at high frequencies, we propose a novel mixed frequency vector autoregressive (MF-VAR) model. This model allows us to combine weekly and monthly information within a unified framework. Our model combines a set of macroeconomic aggregates such as industrial production, unemployment rates, and inflation with high-frequency information from financial markets such as stock prices, interest rate spreads, and weekly information on the Fed's balance sheet size. The latter set of high-frequency time series is used to dynamically interpolate the monthly time series to obtain weekly macroeconomic measures. We use this setup to simulate counterfactuals in absence of monetary stimulus. The results show that the monetary expansion caused higher output growth and stock market returns, more favorable long-term financing conditions and a depreciation of the US dollar compared with a no-policy benchmark scenario

Economics · Interest rate · Liberian dollar · Macroeconomics · Monetary economics · Monetary policy · Recession · Stock (firearms · Unemployment · COVID-19 Pandemic Impacts · Finance · Market Dynamics and Volatility · Monetary Policy and Economic Impact