Macroeconomic News and Asset Prices Before and after the Zero Lower Bound
32 Pages Posted: 28 Oct 2016
Date Written: 2016-10-01
With short-term policy interest rates constrained by their effective zero lower bound (ZLB), monetary policy relied on communicating the future path of policy conditional on incoming macroeconomic data. Motivated by this, we exploit intra-day prices to investigate how updates on the state of the U.S. economy affect interest rates and exchange rates before and after the ZLB. We find that releases reflecting the dual mandate of the Fed rose in importance and – as an ex-post acknowledgement of the sources of the Great Recession – additional housing market indicators and GDP revisions, that hitherto left markets unaffected, became market movers.
JEL Classification: F42, F44, G14
Suggested Citation: Suggested Citation