Surprising monetary easing shocks increase uncertainty, dampening economic activity.
The study looked at how unexpected changes in monetary policy affect how uncertain people are about future monetary policy. They found that when the central bank unexpectedly makes it easier to borrow money, it actually makes people more uncertain about what will happen next. On the other hand, when the central bank unexpectedly makes it harder to borrow money, it doesn't really change how uncertain people are. This increased uncertainty caused by unexpected easing of monetary policy can have negative effects on the economy.