Information Effects of Euro Area Monetary Policy: New Evidence from High-Frequency Futures Data

30 Pages Posted: 9 Apr 2019

Date Written: 2019

Abstract

Central bank announcements move financial markets. The response of inflation and growth expectations, on the other hand, is often small or even counterintuitive. Based on tick-by-tick futures prices on bonds and stock prices, I confirm these seemingly puzzling results for the euro area and provide evidence that they are due to central bank information effects. That is, ECB announcements convey information not only about monetary policy, but also about economic fundamentals. I separate these "information shocks" from "pure policy shocks" via sign restrictions and find intuitive effects of both shocks on a wide set of financial market prices and survey measures of economic expectations.

Keywords: Monetary Policy, High-Frequency Identification, Central Bank Information

JEL Classification: E52, E44, E32, C32

Suggested Citation

Kerssenfischer, Mark, Information Effects of Euro Area Monetary Policy: New Evidence from High-Frequency Futures Data (2019). Deutsche Bundesbank Discussion Paper No. 07/2019, Available at SSRN: https://ssrn.com/abstract=3368356

Mark Kerssenfischer (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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