Heightened uncertainty boosts real impact of monetary policy on economy.
The study shows that when uncertainty in productivity is high, monetary policy has a stronger impact on the economy. Firms focus more on productivity during uncertain times, leading them to pay less attention to monetary policy changes. This causes firms to react less to monetary policy actions, making the effects of these actions more significant on the real economy. The research used a specific statistical method to analyze the relationship between uncertainty, attention allocation, and monetary policy asymmetry, finding that monetary policy shocks have a greater effect on output when uncertainty levels are high.