Effect of news and noise shocks of US monetary policy on economic fluctuations in emerging market economies
研究美国货币政策的消息和噪音冲击如何影响新兴市场经济体的经济波动，发现消息冲击导致衰退，噪音冲击引发繁荣，且噪音驱动的波动成本更高。
Abstract This study investigates the effect of news and noise shocks of US monetary policy on economic fluctuations in emerging market economies. In the first part of our two‐step estimation method, the news and noise shocks of US monetary policy are estimated using dynamic structural vector autoregression identification. In the second step, the impact of the news and noise shocks on macro variables reflecting the business cycle (e.g., production, consumption, investment and trade balance) is examined using local projection. Our empirical results show no significant differences in the responses to both shocks at the early stage, when news and noise are not separable. However, when the monetary policy becomes known, emerging market economies enter a full‐scale recession with respect to a news shock of raised US interest rates. Meanwhile, emerging market economies enter an economic boom phase of the business cycle when the shock turns out to be noise. Fluctuations driven by noise are likely to incur greater costs than normal economic fluctuations because the former are out of sync with the fundamentals.