TY  - JOUR
AU  - Nakamura, Emi
AU  - Steinsson, Jón
TI  - High Frequency Identification of Monetary Non-Neutrality: The Information Effect
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19260
PY  - 2013
Y2  - July 2013
DO  - 10.3386/w19260
UR  - http://www.nber.org/papers/w19260
L1  - http://www.nber.org/papers/w19260.pdf
N1  - Author contact info:
Emi Nakamura
Department of Economics
University of California, Berkeley
685 Evans Hall
Berkeley, CA 94720
Tel: 510/643-2104
E-Mail: enakamura@berkeley.edu

Jón Steinsson
Department of Economics
University of California, Berkeley
671 Evans Hall
Berkeley, CA 94720
Tel: 510/642-3674
E-Mail: jsteinsson@berkeley.edu
AB  - We present estimates of monetary non-neutrality based on evidence from high-frequency responses of real interest rates, expected inflation, and expected output growth. Our identifying assumption is that unexpected changes in interest rates in a 30-minute window surrounding scheduled Federal Reserve announcements arise from news about monetary policy. In response to an interest rate hike, nominal and real interest rates increase roughly one-for-one, several years out into the term structure, while the response of expected inflation is small. At the same time, forecasts about output growth also increase—the opposite of what standard models imply about a monetary tightening. To explain these facts, we build a model in which Fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals. Our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output.
ER  -