Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161468
Authors: 
Tillman, Peter
Year of Publication: 
2016
Series/Report no.: 
ADBI Working Paper No. 592
Abstract: 
It is well known that a tightening or easing of the United States' monetary policy affects financial markets in emerging economies. This paper argues that uncertainty about future monetary policy is a separate transmission channel. We focus on the taper tantrum episode in 2013, a period with an elevated uncertainty about monetary policy, and use a data set that contains 90,000 Twitter messages ("tweets") on Federal Reserve tapering. Based on this data set, we construct a new index about monetary policy uncertainty using a list of uncertainty keywords. An advantage of this index is that it reflects uncertainty about a specific policy decision. An estimated vector autoregression (VAR) shows that uncertainty shocks lead to a fall in asset prices and a depreciation of local currencies. We also discuss the policy implications of this uncertainty channel of monetary policy transmission.
Subjects: 
Federal Reserve policy
monetary policy
monetary policy transmission
policy uncertainty
taper tantrum
uncertainty
uncertainty shocks
emerging economies
twitter
JEL: 
E32
E44
E52
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/
Document Type: 
Working Paper

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