Does Monetary Policy Respond to Uncertainty? Evidence from Australia

We construct a novel measure of uncertainty using expert monetary policy recommendation data for Australia. Our results suggest that the Reserve Bank of Australia (RBA) tends to lower the cash rate when expert uncertainty is high. This result is robust to using other uncertainty measures.

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Bibliographic Details
Published in:Australian economic review 2019-09, Vol.52 (3), p.336-343
Main Authors: Ponomareva, Natalia, Sheen, Jeffrey, Wang, Ben Zhe
Format: Article
Language:English
Subjects:
Banking
Monetary policy
Uncertainty
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Description
Summary:We construct a novel measure of uncertainty using expert monetary policy recommendation data for Australia. Our results suggest that the Reserve Bank of Australia (RBA) tends to lower the cash rate when expert uncertainty is high. This result is robust to using other uncertainty measures.
ISSN:0004-9018
1467-8462
DOI:10.1111/1467-8462.12338