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

See all articles by Bernd Hayo

Bernd Hayo

University of Marburg - School of Business & Economics

Ali M. Kutan

Southern Illinois University at Edwardsville

Matthias Neuenkirch

University of Trier - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 30, 2012

Abstract

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

Hayo, Bernd and Kutan, Ali M. and Neuenkirch, Matthias, Financial Market Reaction to Federal Reserve Communications: Does the Crisis Make a Difference? (January 30, 2012). Joint Discussion Paper Series in Eonomics No. 08-2008. Available at SSRN: https://ssrn.com/abstract=1155481 or http://dx.doi.org/10.2139/ssrn.1155481

Bernd Hayo

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

Ali M. Kutan

Southern Illinois University at Edwardsville ( email )

Department of Economics and Finance AH-3141
Edwardsville, IL 62026-1102
United States
618-650-3473 (Phone)
618-650-3047 (Fax)

HOME PAGE: http://https://ideas.repec.org/e/pku30.html

Matthias Neuenkirch (Contact Author)

University of Trier - Faculty of Economics ( email )

Universitätsring 15
Trier, 54296
Germany
+49 - (0)651 - 201 - 2629 (Phone)

HOME PAGE: http://www.uni-trier.de/index.php?id=50130

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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