Macroeconomic effects of conventional and unconventional monetary policy shocks

This thesis investigates the macroeconomic effects of monetary policy shocks—both conventional and unconventional—on real interest rates, with a specific focus on the role of financial disturbances. In particular, it explores how first-moment financial shocks (unexpected changes in financial stress) and second-moment shocks (uncertainty) influence the dynamics of the natural real interest rate (R*). The study is motivated by the evolving landscape of monetary policy since the Global Financial Crisis, which has seen central banks increasingly rely on unconventional tools such as quantitative easing and forward guidance. Utilizing a Vector Autoregression (VAR) model with U.S. data, this research provides empirical evidence on the transmission of monetary policy under conditions of financial stress and uncertainty. The analysis reveals that both types of financial shocks significantly affect real interest rates, with implications for investment behavior, credit availability, and macroeconomic stability. By distinguishing the effects of different shocks, the thesis contributes to a more nuanced understanding of how financial markets interact with monetary interventions, offering valuable insights for policymakers in designing effective and resilient monetary strategies.