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Consumer interest rate and noise shocks in monetary policy
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Resumo(s)
The present paper analyzes the differences between shocks to the monetary policy and the
consumer interest rates in a context without perfect information where the agents observe
only a noisy signal on their interest rate, thus resorting to a signal extraction problem before
making their consumption decisions. The results show that non-monetary policy rate
shocks – here designated as transmission mechanism shocks – are more important in determining
economic fluctuations vis-à-vis monetary policy shocks. Noise is not impactful, thus
not very important in determining consumers’s decisions. The results call for policymakers’
special attention when designing macroprudential policies that affect the transmission
mechanism of interest rates
Descrição
Palavras-chave
Monetary policy Noise Signal extraction Transmission mechanism