Reposted by Peter KaradiCentre for Economic Policy Research @cepr.org · 24/12/2025Top CEPR Discussion Paper of 2025 - DP19923 Disentangling Monetary Policy, Central Bank Information, and Fed Response to News Shocks Marek Jarocinski, Peter Karadi ow.ly/ta7M50XLqSF #CEPR_MEF #EconSky #2025inReview 012
Peter Karadi @peterkaradi.bsky.social · 11/02/20254/4 Purified monetary policy shocks align well with theoretical predictions: a tightening leads to a temporary downturn 🔻, lower prices 📉, and tighter financial conditions 💰. 📄 Full paper here: bit.ly/4jUJvm8bit.ly 000
Peter Karadi @peterkaradi.bsky.social · 11/02/20253/4 In this paper, we find you also need to control for Fed communication about the economic outlook. 🏦💬 The high-frequency co-movement of interest rate and stock-price surprises can help you achieve this. 📊🔎 100
Peter Karadi @peterkaradi.bsky.social · 11/02/20252/4 Michael Bauer & Eric Swanson (2024a,b) argued that the Fed’s unexpectedly aggressive response to recent news biases measurement and must be controlled for. They have a point. But is that enough? 🤔 100
Peter Karadi @peterkaradi.bsky.social · 11/02/20251/4 The challenge: Fed surprises aren’t just temporary rate shocks. They can also change market perceptions about the economic outlook and systematic policy. This can contaminate measurement. 📉📈 100
Peter Karadi @peterkaradi.bsky.social · 11/02/2025📢 New paper with Marek Jarociński (ECB) using Fed announcements to measure the impact of Fed policy on activity and prices. 🔍📊 🧵👇 110
