López-No ia, Gab iela; Pedemon e, Ma hieu
Wo king Pape
Mone a y policy e ec s on i ms' unce ain y
IDB Wo king Pape Se ies, No. IDB-WP-1732
P o ided in Coope a ion wi h:
In e -Ame ican De elopmen Bank (IDB), Washing on, DC
Sugges ed Ci a ion: López-No ia, Gab iela; Pedemon e, Ma hieu (2025) : Mone a y policy e ec s on
i ms' unce ain y, IDB Wo king Pape Se ies, No. IDB-WP-1732, In e -Ame ican De elopmen Bank
(IDB), Washing on, DC,
h ps://doi.o g/10.18235/0013615
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Mone a y Policy E ec s on Fi ms’ Unce ain y
Gab iela López-No ia
Ma hieu Pedemon e
WORKING PAPER No IDB-WP-1732
In e -Ame ican De elopmen Bank
Depa men o Resea ch and Chie Economis
July 2025
* Banco de México
** In e -Ame ican De elopmen Bank
Mone a y Policy E ec s on Fi ms’ Unce ain y
Gab iela López-No ia*
Ma hieu Pedemon e**
In e -Ame ican De elopmen Bank
Depa men o Resea ch and Chie Economis
July 2025
Ca aloging-in-Publica ion da a p o ided by he
In e -Ame ican De elopmen Bank
Felipe He e a Lib a y
López No ia, Gab iela.
Mone a y policy e ec s on i ms’ unce ain y / Gab iela López-No ia, Ma hieu
Pedemon e.
p. cm. — (IDB Wo king Pape Se ies ; 1732)
Includes bibliog aphical e e ences.
1. Mone a y policy-Mexico. 2. In la ion (Finance)-Mexico. 3. Business
o ecas ing-Mexico. 4. In la ion (Finance)-Fo ecas ing-
Mexico. 5. Unce ain y.
6. Mexico-Economic condi ions. I. Pedemon e, Ma hieu. II. In e -Ame ican
De elopmen Bank. Depa men o Resea ch and Chie Economis . III. Ti le.
IV. Se ies.
IDB-WP-1732
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he In e -Ame ican De elopmen Bank, i s Boa d o Di ec o s, o he coun ies hey ep esen .
Abs ac : We s udy how mone a y policy a ec s in la ion unce ain y. Using a su ey o
Mexican i ms and exploi ing quasi- andom a ia ion in he esponse da e, we es ima e
he e ec o a mone a y policy decision and su p ise on i ms’ pe cei ed in la ion un-
ce ain y. We ind ha a one pe cen age poin con ac iona y mone a y policy educes
in la ion unce ain y by 0.02 pe cen age poin s. We explo e how his esul is a ec ed by
le els o highe and lowe agg ega e unce ain y. We ind ha mone a y policy igh en-
ing is wice as e ec i e in educing in la ion unce ain y in pe iods o highe economic
unce ain y, such as ade unce ain y. Ou indings highligh he ole o mone a y pol-
icy in educing in la ion unce ain y. We discuss ha in pe iods o unce ain y, mone a y
au ho i ies ace a ade-o be ween s imula ing he economy and inc easing unce ain y
abou he in la ion ou look.
JEL classi ica ions: E31; D80; D84; E52
Keywo ds: In la ion unce ain y, Fi ms’ expec a ions, Mone a y policy, Su ey da a
*We hank Joel Cas illo o excellen esea ch assis ance. The iews exp essed he e a e solely hose
o he au ho s and do no necessa ily e lec he iews o he IDB o he Bank o Mexico. Emails:
[email p o ec ed]g.mx, [email p o ec ed].
1
1 In oduc ion
“Fo he ime being, we a e well posi ioned o wai o lea n mo e abou he likely cou se
o he economy be o e conside ing any adjus men s o ou policy s ance.”
Je ome Powell, June 24, 2025
Economic unce ain y s ongly a ec s households and i ms’ decisions, which also a -
ec s economic g ow h (Bloom,2009;Kuma e al.,2023;Coibion e al.,2024;Bake e al.,
2023). While many pape s ha e ocused on he e ec o unce ain y on economic ou -
comes and he o igins o unce ain y, he e is less e idence on how policies can educe
agen s’ unce ain y. Addi ionally, communica ion abou mone a y policy has been sug-
ges ed as a way o guide economic agen s and communica e unce ain y (Coibion e al.,
2020). Mone a y policy decisions, howe e , can likewise be a s ong and e icien way o
in luence agen s’ unce ain y. The e ec s o mone a y policy on unce ain y can be pa ic-
ula ly impo an in de eloping economies, whe e sou ces o unce ain y can be ex e nal
and highly dis up i e.
This pape uses quasi- andom a ia ion o s udy how mone a y policy ac ions and
news a ec i ms’ expec ed in la ion unce ain y. We use he Mon hly Su ey o Regional
Economic Ac i i y conduc ed by he Cen al Bank o Mexico (hence o h Banxico’s Re-
gional Su ey), a panel su ey ha asks i ms o p o ide scena ios o in la ion o e he
nex 12 mon hs wi h he p obabili y o occu ence ha hey would assign o each o hem.
Wi h he su ey, we can measu e i ms’ in la ion unce ain y in Mexico on a mon hly basis
by measu ing he implied s anda d de ia ion o e he in la ion scena ios and p obabili-
ies a he i m le el. The su ey ecei es answe s wi hin a mon h, so some i ms answe
be o e and o he s a e a mone a y policy mee ing. We build symme ic 5-day windows
a ound mone a y policy decisions and use a ia ion in he da e o esponse o see how
i ms’ in la ion unce ain y changes a e a mone a y policy decision.
We es whe he i ms ha answe he su ey be o e and a e he mee ing a e simila .
We ind no di e ences in hei obse able cha ac e is ics, as well as in hei p e-mee ing
in la ion unce ain y. When we compa e hei le el o unce ain y be o e and a e he
mee ing, we ind no di e ences in hei esponses. We hen explo e how he di ec ion
2
and size o he mone a y policy decision a ec hei unce ain y. We ind ha con ac-
iona y mone a y policy shocks signi ican ly a ec i ms’ expec ed in la ion unce ain y.
A 25-basis poin su p ise mone a y policy igh ening educes i ms’ in la ion unce ain y
signi ican ly by 0.5 pe cen age poin s. Addi ionally, he e ec is obus o he inclusion o
speci ic i m con ols, as well as i m ixed e ec s.
We hen explo e how his e ec in e ac s wi h he global economic en i onmen . In
pa icula , we in es iga e whe he he e ec ound is ampli ied when agg ega e unce -
ain y inc eases, measu ed as economic and ade isk. We ind ha mone a y policy
ac ions a e mo e e ec i e in educing unce ain y in si ua ions o highe agg ega e unce -
ain y. In pa icula , when ade isks, domes ic o agg ega e, a e one s anda d de ia ion
highe , a su p ise mone a y policy igh ening has wice as much o he a e age e ec on
unce ain y. This e ec is obus o a e y speci ic i m con ol ha accoun s o o he as-
pec s o he economic en i onmen . We ind a simila bu less obus e ec o agg ega e
le el o unce ain y measu ed by he VIX.
This inding highligh s he impo ance o mone a y policy in pe iods o high agg ega e
unce ain y. Low in la ion pe iods a e gene ally less ola ile han high in la ion pe iods,
as in la ion usually does no each nega i e e i o y. Because o ha , a mone a y policy
igh ening ends o educe in la ion unce ain y. In pe iods o agg ega e isk and in la-
iona y p essu es, aking decisi e ac ions o educe in la ion eassu es esponden s ha
in la ion will no inc ease, educing in la ion unce ain y.
We hen explo e he e ogeneous e ec s by i m. We explo e whe he i ms ha a e mo e
exposed o ade eac s ongly o no o mone a y policy ac ions. We ind ha , in pe iods
o high in la ion unce ain y, i ms ha impo inpu s eac s ongly o mone a y policy
eac ions. In hese cases, he e ec o mone a y policy eac ions is 2.5 imes la ge han he
a e age e ec o mone a y policy ac ions. This esul shows ha mone a y policy ac ions
a e especially ele an o i ms exposed o he sou ce o unce ain y.
Ou indings show ha cen al banks ace a ade-o in pe iods o high agg ega e un-
ce ain y, such as he COVID-19 pandemic o he ecen a i wa . While mone a y policy
ac ions can ha e a di ec e ec in mi iga ing he po en ial e ec s on ou pu , i can also in-
3
c ease he ea o uncon olled in la ion. Mone a y policy easing inc eases he chances o
highe in la ion. Ou esul s indica e ha su p ising mone a y policy easing inc ease in-
la ion unce ain y o i ms, ha his e ec is la ge when he e is highe agg ega e unce -
ain y, and ha i ms di ec ly exposed a e a ec ed he mos . Mone a y policy au ho i ies
should accoun o hose isks app op ia ely.
These esul s a e pa icula ly ele an gi en he ecen de elopmen s o ad anced as
well as de eloping economies. Recen a i unce ain y is a ec ing many ad anced and
eme ging economies, in pa icula Mexico. The in la iona y e ec o a i s depends on
he mone a y policy eac ion (Aucle e al.,2025;Bianchi and Coulibaly,2025;Monacelli,
2025) and in p ac ice, ecen s udies ha e ound ha hey inc ease consume p ices (Fa-
jgelbaum e al.,2020) and in la ion (Baslandze e al.,2025). This pape shows ha i ms
inc ease hei unce ain y mo e when he e is mo e unce ain y abou a i s. Mone a y
au ho i ies should app op ia ely weigh he posi i e and nega i e e ec s o mone a y pol-
icy ac ions in hose momen s o a oid second-o de e ec s.
O he wo ks ha e used a simila empi ical s a egy. Fo example, Di Pace e al. (2025)
use a simila window a ound mone a y policy o es ima e how mone a y policy ac ions
a ec i ms’ in la ion expec a ions and o he momen s o he dis ibu ion using da a om
he Uni ed Kingdom. Lopez-No ia (2025) uses a simila empi ical s a egy o es ima e
he e ec o mone a y policy ac ions and su p ises in Mexico, inding ha mone a y pol-
icy su p ises e ec i ely educe in la ion expec a ions. As in Lopez-No ia (2025), we use
mone a y policy su p ises and a na ow window a ound he mone a y policy decision
o es ima e he e ec o mone a y policy. Ou iden i ica ion assump ion elies on quasi-
andom a ia ion o i ms’ da e o esponse. We p o ide se e al es s o show ha i ms
ha answe be o e o a e he mone a y policy mee ing in a 5-day window a ound he
decision a e obse a ionally he same and p esen simila esul s.
When explo ing agg ega e unce ain y, we use di e en a iables ela ed o unce -
ain y in Mexico and global unce ain y. We cha ac e ize unce ain y wi h he economic
policy unce ain y index o Mexico buil by Bake e al. (2016); he VIX, a measu e o
s ock ma ke ola ili y in he Uni ed S a es; and a wo ld ade unce ain y index buil by
4
Calda a e al. (2020). We ind ha he ini ial di ec e ec doubles i s size when ade un-
ce ain y is one s anda d de ia ion la ge . This esul highligh s mone a y policy’s ole in
educing unce ain y abou he in la iona y scena ios.
This pape con ibu es o he g owing li e a u e ha s udies economic unce ain y’s
e ec on economic agen s’ decisions and ac ions. Bloom (2009) show ha highe unce -
ain y nega i ely a ec s i ms’ hi ing and in es men decisions, educing economic ac i -
i y. Coibion e al. (2024) use a andomized con ol ial (RCT) o gene a e exogenous a i-
a ion on he mac oeconomic unce ain y o Eu opean households. They ind ha highe
unce ain y educes consume s’ spending on nondu able goods and se ices, as well as
on holiday packages and luxu y goods. Simila ly, Geo ga akos e al. (2024) ely on in-
o ma ion ea men s andomly assigned o i ms in New Zealand o gene a e exogenous
a ia ion in i ms’ mac oeconomic unce ain y. They ind ha highe unce ain y i)leads
hem o educe employmen , p ices, and in es men ; ii) makes hem less likely o in es
in new echnologies, o seek ou new expo ma ke s o new loans, o o de elop new
acili ies; and iii) educes hei sales.
We also con ibu e o he li e a u e on he d i e s and e ec s o mac oeconomic unce -
ain y (Binde e al. (2025)). Bake e al. (2023) show ha exogenous unce ain y shocks
nega i ely a ec economic ac i i y. Binde e al. (2025) ind ha in la ion unce ain y, mea-
su ed as he dispe sion o p o essional in la ion o ecas s, educes indus ial p oduc ion
and inc eases in la ion. Using i m-le el da a, Yo zo e al. (2023) in es iga e he impac
o in la ion unce ain y on i m pe o mance, pa icula ly on p o i ma gins and p oduc-
i i y. They ind ha in la ion unce ain y has inc eased since 2021, expanding ac oss all
economic sec o s and nega i ely impac ing i ms’ p o i ma gins and p oduc i i y. Ku-
ma e al. (2023) analyze he e ec o mac oeconomic unce ain y on i ms’ decisions and
choices. They ind ha highe mac oeconomic unce ain y educes hei p ices, employ-
men , and in es men . Kos yshyna and Pe e sen (2024) ind ha a dec ease in unce ain y
abou in la ion leads o mo e household spending and non-du able spending.
Londono e al. (2024) in es iga e he e ec o in la ion unce ain y on in es men , in-
dus ial p oduc ion, and consump ion be ween 1960 and 2023 in he Uni ed S a es. They
5
om ze o bu also o simila magni ude in each speci ica ion.
This esul indica es ha mone a y policy can indeed in luence in la ion unce ain y.
Mone a y policy ac ions no only ha e e ec s on he a e age in la ion, as Di Pace e al.
(2025) and Lopez-No ia (2025) ha e shown, bu also a ec second momen s. This inding
has impo an economic implica ions, as some s udies ha e shown ha unce ain y can
ha e an ad e se e ec on economic decisions (Kuma e al.,2023;Coibion e al.,2024;
Kos yshyna and Pe e sen,2024). In ha sense, mone a y policy au ho i ies ha e a ade-
o be ween he di ec e ec o mone a y policy decisions on in la ion expec a ions and
hei indi ec impac on unce ain y. This second e ec migh be mo e p e alen in pe iods
o high agg ega e unce ain y when unce ain y abou he economy migh in luence mo e
economic decisions. In he nex sec ion, we explo e how he main e ec we ound in e ac s
wi h agg ega e unce ain y.
4 Agg ega e Unce ain y and Discussion
We nex u n o examining how agg ega e unce ain y in e ac s wi h his e ec . The idea is
o explo e whe he ce ain le els o agg ega e unce ain y in luence he e ec o mone a y
policy. We es ima e he ollowing speci ica ion o assess his e ec :
σ(πe)i, =α +β×I(1 = a e )i, +γ×I(1 = a e )i, ×MP S +δ×I(1 = a e )i, ×
θj
+η×I(1 = a e )i, ×MP S ×θj
+εi, ,
(3)
whe e θj
s ands o ei he one o he ollowing measu es o agg ega e unce ain y. We
use se e al measu es o agg ega e unce ain y ela ed o di e en sou ces o unce ain y.
Fi s , we conside Mexico’s economic policy unce ain y index (MEPU). MEP U is a
ex -based unce ain y measu e buil by Bake e al. (2016). I e lec s he equency o
newspape a icles con aining e ms ela ed o Mexico’s economy, i s egula ions o laws,
go e nmen ins i u ions, he policies implemen ed o p oposed, and unce ain y.
12
Second, we conside V IX, an agg ega e unce ain y measu e cons uc ed using he
implied ola ili ies o he S&P 500 index op ions. I is conside ed a measu e o he ola il-
i y o global inancial ma ke s.2
Finally, we also conside he ade policy unce ain y index (TPU) de eloped by Cal-
da a e al. (2020). I is buil by coun ing he “join occu ences o ade policy and unce -
ain y e ms ac oss majo newspape s” wo ldwide.
Wi h ha in o ma ion, we un speci ica ion 3wi h each o hose a iables one a a ime.
Each a iable is no malized o ze o in e ms o s anda d de ia ions, so he in e ac ion o
he mone a y policy dummy and he mone a y policy su p ise will show he addi ional
e ec ha a mone a y policy su p ise has in pe iods o one s anda d de ia ion high o
low unce ain y. All eg essions conside a mee ing ixed e ec . This means ha , gi en a
le el o agg ega e unce ain y, we see whe he he decision changes ha le el. Ou main
es ima e θj
measu es he e ec wi hin mee ing. Table 3shows he esul s.
2Fo mo e de ails see: h ps://www.cboe.com/ adable p oduc s/ ix/.
13
Table 3: E ec o Mone a y Policy on Unce ain y in Pe iods
o High Unce ain y
(1) (2) (3)
I(1 = a e )i, 0.072*** 0.081** 0.060*
(0.025) (0.034) (0.019)
I(1 = a e )i, ×MP S -0.020*** -0.019** -0.026***
(0.007) (0.007) (0.003)
I(1 = a e )i, ×θj
-0.010 -0.034** -0.008
(0.032) (0.016) (0.026)
I(1 = a e )i, ×MP S ×θj
-0.018** -0.015* -0.016***
(0.007) (0.007) (0.004)
Time FE Yes Yes Yes
Unce ain y Measu e MEPU VIX TPU
Obse a ions 4775 4775 4775
R2 0.003 0.003 0.004
No e: This able shows esul s om eg ession 3. The dependen a iable
is in la ion unce ain y. I(1 = a e )i, is an indica o ha akes a alue o
1 i i m ianswe ed a e he mone a y policy mee ing wi hin window
and 0 i i answe ed be o e, bu du ing window .MP S is he mone a y
policy shock. θj
is he measu e o agg ega e unce ain y unce ain y. We
use D iscoll-K aay clus e ed s anda d e o s.
Table 3shows ha when unce ain y is one s anda d de ia ion highe ha he a e age
le el, measu ed by he MEPU, VIX o TPU, he e ec o a mone a y policy igh ening in e-
ducing unce ain y is highe . In pa icula , he e ec is almos wice as ele an han when
he e is an a e age le el o unce ain y. Simila ly, in pe iods when agg ega e unce ain y
is one s anda d de ia ion lowe han a e age, he e ec o mone a y policy igh ening is
almos non- ele an .
In his se o esul s we in e ac he e ec s wi h agg ega e cha ac e is ics ha can also
be a ec ing o he cha ac e is ics o i ms. Figu e 2shows he iple in e ac ion (I(1 =
14
a e )i, ×MP S ×θj
) in e sions o he model whe e we con ol o pas unce ain y and
pas and cu en in la ion expec a ions. We see ha while he e ec s o VIX a e lowe
and lose signi icance in some speci ica ions, he e ec s a e gene ally obus o hese ime-
a ying i m-speci ic con ols.
Figu e 2: T iple In e ac ion Coe icien wi h Con ols
-.04 -.02 0 .02 .04
Coe icien
Base
Base+lag SD
Base+lag IE
Base+lags IE and SD
Base
Base+lag SD
Base+lag IE
Base+lags IE and SD
Base
Base+lag SD
Base+lag IE
Base+lags IE and SD
MEPU VIX TPU 95% CI
These esul s show ha when unce ain y is high, mone a y au ho i ies ace a ade-o :
on one hand, easing mone a y policy can help o alle ia e he di ec e ec s o unce ain y,
bu on he o he , mone a y policy easing can inc ease unce ain y, as ou esul s indica e.
This could be due o he ac ha some o hose scena ios a e in la iona y and he ac ha
he mone a y au ho i y is no p ima ily add essing ha could wo y some i ms.
This e ec is pa icula ly ele an o ade unce ain y, a phenomenon ha a ec s he
Mexican economy and ha usually does no esul om in e nal decisions. We can see ha
when ade unce ain y is highe , he e ec o mone a y policy con ac ions is almos wice
as la ge. T ade shocks can be con ac iona y, bu also in la iona y, o example, in he case
o a i s (Monacelli,2025). These indings highligh an e en mo e complica ed scena io
o mone a y policy au ho i ies. Coibion e al. (2025) show ha consume s expec a i s
o be in la iona y. Thei indings as well as ou s sugges ha , i mone a y policy ies
o accommoda e mone a y policy shocks, in la ion unce ain y can inc ease in a scena io
whe e in la iona y p essu es a e pe cei ed o be high by economic agen s.
15
Table 3and Figu e 2show ha ade unce ain y seems o be a consis en sou ce o
unce ain y ha makes mone a y policy mo e e ec i e. We hen explo e whe he i ms
ha a e mo e exposed o ade do eac s onge o policy eac ions du ing pe iods o
highe unce ain y. To do so, we ely on a su ey ques ion ha asks i i ms di ec ly
impo some o hei inpu s. Then, we un eg ession (3), bu in e ac ing he pa ame e s
wi h a a iables ha is 1 i he i m impo s inpu s and ze o o he wise. Then, in igu e
3we plo he o al eac ion o i ms o mone a y policy su p ises (MP S = 1) in pe iods
o one s anda d de ia ion high agg ega e unce ain y (γ+η), sepa a ing he e ec s o
impo e s and non-impo e s. The coe icien s plo ed all come om he same eg ession,
so es s be ween pa ame e s a e compa able.
Figu e 3: E ec on High Agg ega e Unce ain y o Impo e s and Non-Impo e s
-.15 -.1 -.05 0 .05 .1 .15
Coe icien
Impo e
Non-Impo e
Impo e
Non-Impo e
Impo e
Non-Impo e
MEPU VIX TPU 95% CI
The igu e shows ha in gene al in pe iod o high unce ain y we see highe coe i-
cien s han he uncondi ional e ec , ep esen ed by he dash line. We can also see ha his
highe e ec is mainly d i en by i ms ha impo goods. Fi ms ha do no impo end
o ha e a highe coe icien o he uncondi ional e ec , e en in pe iods o high agg ega e
unce ain y. Finally, we can see ha impo e s ha e a highe and s a is ically di e en
e ec when he shock is associa e o highe global unce ain y. This esul highligh s how
mone a y policy can be specially e ec i e o i ms ha migh be mo e di ec ly impac ed
by he sou ce o unce ain y.
16
5 Conclusion
This pape explo es how mone a y policy decisions a ec he in la ion unce ain y o eco-
nomic agen s. We ind ha su p ise mone a y policy igh ening educes in la ion un-
ce ain y signi ican ly when we compa e i ms answe ing be o e and a e he mone a y
policy mee ing. We do no ind s a is ically signi ican e ec s o he mee ing by i sel ,
highligh ing he impo ance o he di ec ion o he decision and no he decision by i sel .
Addi ionally, we ind ha his e ec is highe in pe iods o highe agg ega e unce -
ain y. Mone a y policy ac ions a e almos wice as e ec i e in educing in la ion unce -
ain y when agg ega e unce ain y is high, especially ade unce ain y. We ind ha his
e ec is pa icula ly impo an o i ms ha a e in ol ed in he sou ce o unce ain y, o
example, in he case o i ms ha impo inpu s, when agg ega e unce ain y is high.
O he wo ks ha e shown ha unce ain y has a nega i e e ec on spending and eco-
nomic ac i i y. The indings o ou pape show a ade-o ha policymake s ace, es-
pecially in pe iods o high agg ega e unce ain y: easing mone a y policy can boos eco-
nomic ac i i y, bu ha boos can be educed as unce ain y also inc eases. We show ha
his ade-o is mo e p e alen in pe iods o high in la ion unce ain y.
This ade-o is pa icula ly ele an in e en s ha ha e cha ac e ized he economy
ecen ly. Fo example, du ing he COVID-19 pandemic, agg essi e mone a y and iscal
expansion wo ied some economic agen s abou he possibili y o highe in la ion. On he
o he side, du ing he ongoing ade wa ha a ec ed Mexico in pa icula , ha ing an ex-
cessi ely expansiona y mone a y policy has he isk o inc easing in la iona y unce ain y
o a poin ha can a ec economic ac i i y.
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A Appendix
A.1 O he Tables
Table 4: In la ion Unce ain y and Mone a y Policy Shocks
(1) (2) (3) (4)
I(1 = a e )i, 0.008 0.010 0.020 0.022
(0.020) (0.020) (0.016) (0.017)
I(1 = a e )i, ×MP S -0.009** -0.010** -0.008* -0.008*
(0.005) (0.004) (0.004) (0.004)
σ(πe)i, −10.063 0.068 0.092
(0.065) (0.055) (0.067)
πe
i, −10.132*** 0.114*** 0.279***
(0.024) (0.025) (0.017)
πe
i, 0.250*** -0.059**
(0.017) (0.018)
Time FE Yes Yes Yes Yes
Indi idual FE Yes Yes Yes Yes
Obse a ions 3912 3912 3912 3912
R2 0.136 0.147 0.457 0.467
No e: This able shows esul s om eg ession 2. The dependen a iable is
in la ion unce ain y. I(1 = a e )i, is an indica o ha akes a alue o 1 i
he i m ianswe ed a e he mone a y policy mee ing wi hin window and
0 i i answe ed be o e, bu du ing window .MP S is he mone a y policy
shock. σ(πe)i, −1is he unce ain y o he i m in he p e ious mon h. We use
D iscoll-K aay s anda d e o s.
A.2 Mone a y Policy Shock
The mone a y policy shock is buil as he change in 3-mon h swap a es in 30-minu e win-
dows b acke ing Banco de M´
exico’s mone a y policy announcemen s (Solis,2023). This
20
Figu e 4: Mone a y Policy Shock and Policy Ra e
Figu e 5: Cap ion
change in 3-mon h swap a es cap u es su p ises abou bo h he cu en le el o he policy
a e and i s u u e pa h since i co e s mo e han one policy mee ing. Solis (2023) uses 3-
mon h swap a es o measu e he mone a y policy su p ise since hose ins umen s a e he
mos liquid swaps e e encing he 28-day in e bank in e es a e (TIIE28D), which closely
ollows he policy a e. In addi ion, he co ela ion be ween his shock and a measu e
buil as he di e ence be ween he change in he policy a e and he a e age o su ey
expec a ions om Bloombe g is abo e 0.9% (Solis,2023). Mone a y policy shocks using
1-mon h swap a es would no cap u e su p ises abou he u u e pa h o he policy a e,
since hey ha e a sho e his o y and a e less liquid, bu hey co ela e wi h he measu es
using 3-mon h swap a es.
Figu e 4plo s aw changes in he policy a e and he he mone a y policy su p ise. As
mos decisions a e an icipa ed, he measu ed shock is ela i ely smalle compa ed o he
ac ual changes in he policy a e.
21
