Title: Uncertainty shocks and monetary policies
Authors: Alessia Paccagnini - University College Dublin (Ireland) [presenting]
Valentina Colombo - University of Verona (Italy)
Abstract: The interaction between uncertainty shocks and conventional and unconventional U.S. monetary policies is investigated. Uncertainty is captured by appealing to some indicators recently developed. Relying on a non-linear VAR, we isolate the effects of uncertainty shocks in recessions versus expansions. Uncertainty shocks trigger negative macroeconomic fluctuations across the business cycle. To offset such fluctuations, the Federal Reserve reacts relying on conventional monetary policy tools. However, when shocks to uncertainty occur during deep recessions, the Federal Reserve reacts switching from the conventional to the unconventional monetary tools.