Economics, Econometrics and Finance
3 years ago

Economic uncertainty drives preference for monetary easing, impacting policy decisions.

Economics Letters
FOMC policy preferences and economic policy uncertainty
Michael A. Ellis, Dandan Liu

Paper Summary

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The paper shows that when economic policy uncertainty goes up, people tend to prefer easier monetary policies. This is true even after considering how policy uncertainty affects inflation and output gap forecasts. The results mainly come from presidents of Federal Reserve Banks, especially those who don't have a vote.