We develop a VAR that allows the estimation of the impact of monetary policy shocks on volatility. Estimates for the US … suggest that an increase in the policy rate by 1% is associated with a rise in unemployment and inflation volatility of about … these volatility effects are driven by the coexistence of agents' fears of unemployment and concerns about the (in) ability …

volatility. Since exchange rate volatility is not observed, we estimate it alongside the remaining quantities in the model. Our … increase in exchange rate volatility. Historical and forecast error variance decompositions indicate that monetary policy … shocks explain an appreciable amount of exchange rate movements and the corresponding volatility. …