Economics Research Seminar – Dr Francesco Fusari
Date: Wednesday 5 February 2025 | Time: 13:30 to 14:30
Location: Newcastle University Business School, Room 4.23
The Economics research group welcomes Dr Francesco Fusari from Newcastle University Business School.
He will present his work, entitled "Skewness and Monetary Policy Decisions."
About the speaker
Dr Francesco Fusari is a Lecturer in Macroeconomics at Newcastle University Business School. His research focuses on monetary policy, financial markets, and the use of advanced econometric techniques to understand economic forecasting.
Research abstract
This paper studies the relationship between monetary policy decisions taken by the Federal Open Market Committee (FOMC) and higher moments of expected economic outcomes. First, I employ quantile factor models to characterize the conditional distribution of central bank economic projections and construct indicators of uncertainty and skewness. Second, I find that the skewness of expected output growth and inflation rate is a crucial predictor of the changes in the intended federal funds rate deliberated by the FOMC. This empirical evidence is found to be reconcilable with central bank’s optimal behavior under non-linear weighting of probability. My findings suggest that considering central moments only is not enough to fully capture the systematic component of monetary policy and lead therefore to important implications for the identification of monetary policy shocks. Specifically, I find that conditioning on higher moments allows to identify monetary policy shocks exhibiting lower predictability and that generate theoretically consistent effects on the economy.