Non-Monetary News in Central Bank Communication

80 Pages Posted: 5 Aug 2019

See all articles by Anna Cieslak

Anna Cieslak

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department

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Date Written: December 16, 2018

Abstract

Using evidence from four major central banks, we decompose news conveyed by central-bank communication into news about monetary policy (monetary news), as well as non-monetary news, i.e., news about economic growth and news affecting financial risk premia. Our approach exploits high-frequency comovement of stocks and interest rates combined with monotonicity restrictions across maturities in the yield curve. We find significant differences in the news composition depending on the communication channel used by central banks. Monetary news prevails in policy decision announcements. However, the non-monetary component accounts for more than half of communications that provide context to policy decisions such as press conferences and minutes. We show that non-monetary news drives a significant part of financial markets' reaction during the financial crisis and in the early recovery, while monetary news gains importance since 2013.

Keywords: central bank communication, monetary policy shocks, yield curve, stock-bond comovement, central bank information effects, risk premia

Suggested Citation

Cieslak, Anna and Schrimpf, Andreas, Non-Monetary News in Central Bank Communication (December 16, 2018). Available at SSRN: https://ssrn.com/abstract=3164894 or http://dx.doi.org/10.2139/ssrn.3164894

Anna Cieslak (Contact Author)

Duke University - Fuqua School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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