Monetary Policy Uncertainty and the Market Reaction to Macroeconomic News

63 Pages Posted: 7 May 2016 Last revised: 18 Sep 2017

See all articles by Alexander Kurov

Alexander Kurov

West Virginia University - College of Business & Economics

Raluca Stan

West Virginia University - College of Business & Economics

Date Written: September 9, 2017

Abstract

We examine whether monetary policy uncertainty influences the reaction of the equity, Treasury security, foreign exchange and crude oil markets, as well as medium-term interest rates, to U.S macroeconomic announcements. Using intraday futures data, we show that in the presence of higher policy uncertainty the response to macroeconomic news weakens in the stock and crude oil markets and strengthens in the Treasury, interest rate and foreign exchange markets. In times of elevated monetary policy uncertainty, macroeconomic announcements impact the financial and crude oil markets to a large extent through expectations of future monetary policy.

Keywords: Monetary policy, Macroeconomic announcements, Financial markets, Intraday data

JEL Classification: E44, E52, E58, F49, G14, G18

Suggested Citation

Kurov, Alexander and Stan, Raluca, Monetary Policy Uncertainty and the Market Reaction to Macroeconomic News (September 9, 2017). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2776357 or http://dx.doi.org/10.2139/ssrn.2776357

Alexander Kurov (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

Raluca Stan

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

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