Jumps, Interest Rates, and Monetary Policy
62 Pages Posted: 21 Mar 2011 Last revised: 25 Jan 2012
Date Written: January 25, 2012
Using daily returns to LIBOR and the US Treasury, we study prominent non-parametric jump measures to test whether the periods of highest jumps occur at the same time as FOMC and MPC meetings, and NBER recession periods. The results suggest important behavior patterns of the FOMC and MPC; unscheduled meetings by the Fed tend to occur before dates when jumps in UK and US interest rates are strongly correlated and in the presence of jumps in monetary policy. The suggested patterns provide implications for portfolio managers who can use jump detection to devise strategies for optimal diversification of correlated events.
Keywords: Jumps, Market Events, Structural Breaks, Monetary Policy
JEL Classification: E58, C51, C22
Suggested Citation: Suggested Citation