The nonlinear transmission of monetary policy: how disagreement among forecasters affect the transmission of the monetary policy shocks in the Euro Area.

Details

Supervisors

Monti, Francesca

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité spécialisée

Abstract

Using a local projection estimation method coupled with a logit function to model a regime switching from high to low disagreement, I found an evidence of the “puzzling” increase of inflation and output during periods of high disagreement that the literature calls “the signalling channel” from the response of a pure contractionary monetary policy shock in the Euro area. In times of low disagreement, inflation and output respond normally from the same shock, by decreasing. I also consider a central bank information shock and find that the effect of the shock, that conveys positive economic outlook, depends on the nature of the disagreement and on the level of the disagreement in the economy. The central bank should monitor carefully the nature of the information they release and the source of the disagreement between the agents.