Working paper/research report

Publication year: 2016

URL: https://hdl.handle.net/10419/161468

Title of series: ADBI Working Paper

Number in series: 592

Abstract: 

It is well known that a tightening or easing of the United States' monetary policy affects financial markets in emerging economies. This paper argues that uncertainty about future monetary policy is a separate transmission channel. We focus on the taper tantrum episode in 2013, a period with an elevated uncertainty about monetary policy, and use a data set that contains 90,000 Twitter messages ("tweets") on Federal Reserve tapering. Based on this data set, we construct a new index about monetary policy uncertainty using a list of uncertainty keywords. An advantage of this index is that it reflects uncertainty about a specific policy decision. An estimated vector autoregression (VAR) shows that uncertainty shocks lead to a fall in asset prices and a depreciation of local currencies. We also discuss the policy implications of this uncertainty channel of monetary policy transmission.

Harvard Citation style: Tillmann, P. (2016) Uncertainty about Federal Reserve policy and Its transmission to emerging economies: Evidence from Twitter. (ADBI Working Paper, 592). Tokyo: Asian Development Bank Institute. https://hdl.handle.net/10419/161468

APA Citation style: Tillmann, P. (2016). Uncertainty about Federal Reserve policy and Its transmission to emerging economies: Evidence from Twitter. (ADBI Working Paper, 592). Asian Development Bank Institute. https://hdl.handle.net/10419/161468