We separate changes of the federal funds rate into two components; one reflects the Fed’s superior forecasts about the state of the economy and the other component reflects the Fed’s reaction to the public’s forecast about the state of the economy. Romer and Romer (2000) found that the Fed...

How do short and long term interest rates respond to a jump in financial uncertainty? We address this question by conducting a local projections analysis with US monthly data, period: 1962-2018. The state-of-the-art financial uncertainty measure proposed by Ludvigson, Ma, and Ng (2019) is found...