Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318148 
Year of Publication: 
2017
Series/Report no.: 
BCAM Working Paper No. 1705
Publisher: 
Birkbeck, University of London, Birkbeck Centre for Applied Macroeconomics (BCAM), London
Abstract: 
A VAR model estimated on U.S. data before and after 1980 documents systematic differences in the response of short- and long-term interest rates, corporate bond spreads and durable spending to news TFP shocks. Interest rates across the maturity spectrum broadly increase in the pre-1980s and broadly decline in the post-1980s. Corporate bond spreads decline significantly, and durable spending rises significantly in the post-1980 period while the opposite short-run response is observed in the pre-1980 period. Measuring expectations of future monetary policy rates conditional on a news shock suggests that the Federal Reserve has adopted a restrictive stance before the 1980s with the goal of retaining control over inflation while adopting a neutral/ accommodative stance in the post-1980 period.
Subjects: 
news shocks
business cycles
VAR models
DSGE models
JEL: 
E20
E32
E43
E52
Document Type: 
Working Paper

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