Lutz, Chandler, Unconventional Monetary Policy and Uncertainty (October 6, 2014). Available for download at SSRN: http://ssrn.com/abstract=2505943

“Using a structural factor-augmented vector autoregression (FAVAR) model and a large database of daily time series, we examine the impact of unconventional monetary policy on multiple proxies of economic and financial uncertainty. Our findings indicate that expansionary unconventional monetary policy shocks lead to large reductions in uncertainty across markets. More specifically, a surprise unconventional monetary easing lowers equity market, policy, housing and mortgage market, exchange rate, and Treasury market uncertainty. Research results further suggest that these reductions in uncertainty differ in magnitude across asset classes and largest for equity markets. Lastly, we find that the effects of these monetary shocks on uncertainty attenuate quickly and dissipate after about 150 days.”