Financial Market Reaction to Federal Reserve Communications: Does the Crisis Make a Difference?
Joint Discussion Paper Series in Eonomics No. 08-2008
18 Pages Posted: 7 Jul 2008 Last revised: 30 Jan 2012
Date Written: January 30, 2012
This paper studies the effects of Federal Reserve communications on US financial market returns from 1998 to 2009 and asks whether a significant change occurred during the financial crisis of August 2007–December 2009. We find, first, that central bank communication moves financial markets in the intended direction. In particular, shorter maturities are affected in an economically meaningful way. Second, speeches by the Chairman generate relatively more public attention than communication by other governors or presidents. Finally, central bank communication is even more market relevant during the financial crisis subsample.
Keywords: Central Bank Communication, Federal Reserve, Financial Crisis, Financial Markets, Monetary Policy
JEL Classification: E52, G14
Suggested Citation: Suggested Citation