Monetary Policy and Uncertainty : A GVAR Approach

Abstract: This thesis investigates how both changes in monetary policy and monetary policy uncertainty from the United States Central bank affects 33 countries through various channels - GDP, Inflation, Equity Prices, Exchange rates and long and short interest rates from 1985 to 2016. This study follows a similar approach to Lei and Liu (2015) and Bi and Anwar (2017) who conduct similar research with a focus on the actions of the US Federal Reserve. The background and Literature review finds overwhelming evidence empirically and theoretically in support of all channels including uncertainty. Using the GVAR model and Generalized impulse response functions we find that a positive standard error shock in Money Supply, Discount Rate and Monetary Policy uncertainty provide some significant results across most channels.