An Examination of the Differential Impact of Monetary Policy Announcements and Explanatory Minutes Releases on the Australian Interest Rate Futures Market

33 Pages Posted: 19 Aug 2013

See all articles by Bronwyn McCredie

Bronwyn McCredie

Queensland University of Technology; Financial Research Network (FIRN)

Paul Docherty

Monash University

Stephen Andrew Easton

University of Newcastle

Katherine Uylangco

Queensland University of Technology - School of Economics and Finance

Date Written: August 19, 2013

Abstract

Unlike US and European jurisdictions, Australian monetary policy announcements are not followed promptly by projections materials or statements that explain the decision process. This information is disclosed two weeks later when the explanatory minutes of the Reserve Bank board meeting are released. This paper is therefore the first study to exploit the unique features of the Australian monetary policy environment in order to examine the differential impact of monetary policy announcements and explanatory statements on the Australian interest rate futures market.

We find that both monetary policy announcements and explanatory minutes releases have a significant impact on the returns and volatility of Australian interest rate futures contracts. When this impact is differentiated, the informational content of explanatory minutes releases is shown to elicit a larger response in returns. Further, the impact of monetary policy announcements is demonstrated to be affected by conditioning on the state of the economy. Specifically, returns respond asymmetrically to interest rate changes, intensify during the Global Financial Crisis, and are moderated by sentiment.

Keywords: Monetary policy announcement, explanatory minutes, asymmetry, global financial crisis, sentiment

JEL Classification: E52, G14

Suggested Citation

McCredie, Bronwyn and Docherty, Paul and Easton, Stephen Andrew and Uylangco, Katherine, An Examination of the Differential Impact of Monetary Policy Announcements and Explanatory Minutes Releases on the Australian Interest Rate Futures Market (August 19, 2013). 26th Australasian Finance and Banking Conference 2013. Available at SSRN: https://ssrn.com/abstract=2312254 or http://dx.doi.org/10.2139/ssrn.2312254

Bronwyn McCredie (Contact Author)

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Paul Docherty

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Stephen Andrew Easton

University of Newcastle ( email )

University Drive
Callaghan, nsw 2308
Australia

Katherine Uylangco

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

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