• Media type: E-Book; Report
  • Title: Uncertainty and the Federal Reserve's balance sheet monetary policy
  • Contributor: Colombo, Valentina [Author]; Paccagnini, Alessia [Author]
  • Published: Milano: Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE), 2024
  • Language: English
  • Keywords: E32 ; Nonlinearities ; Uncertainty ; C50 ; Monetary Policy ; E52 ; Smooth Transition VAR
  • Origination:
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  • Description: This study assesses the impact of financial uncertainty shocks in the US and explores the influence of monetary policy. Using a nonlinear Vector Autoregressive model, incorporating short-term interest rates and the Federal Reserve's balance sheet policy, we find that the reaction of the monetary policy is asymmetric across the business cycle. The state-dependent responses in consumption and investment significantly influence GDP fluctuations. A counterfactual analysis reveals that balance sheet-related monetary policy helps reduce both the duration and severity of the recessionary impacts caused by these shocks.
  • Access State: Open Access