Measuring Euro Area Monetary Policy

Altavilla, Carlo; Brugnolini, Luca; Gürkaynak, Refet S.; Motto, Roberto; Ragusa, Giuseppe

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Measuring Euro Area Monetary Policy

CEPR Discussion Paper No. DP13759

44 Pages Posted: 11 Jun 2019 Last revised: 4 Oct 2019

See all articles by Carlo Altavilla

Refet S. Gürkaynak

Bilkent University - Department of Economics

Giuseppe Ragusa

University of Pisa - Department of Economics and Management

There are 4 versions of this paper

Date Written: May 2019

Abstract

We map ECB policy communication into yield curve changes and study the information flow on policy dates. A byproduct is the publicly available Euro Area Monetary Policy Event- Study Database (EA-MPD), containing intraday asset price changes. We find that Policy Target, Forward Guidance and Quantitative Easing factors capture about all the variation in the yield curve, with different factors appearing in the windows covering the policy decision announcement and the press conference, and having time-varying variance shares. We study sovereign yields, exchange rates, stock prices, persistence of effects and response asymmetry. Our methodology can be implemented for any policy-related event.

Keywords: Asymmetry, ECB policy surprise, Event-Study, intraday, Persistence

JEL Classification: E43, E44, E52, E58, G12, G14

Suggested Citation: Suggested Citation

Altavilla, Carlo and Brugnolini, Luca and Gürkaynak, Refet S. and Motto, Roberto and Ragusa, Giuseppe, Measuring Euro Area Monetary Policy (May 2019). CEPR Discussion Paper No. DP13759, Available at SSRN: https://ssrn.com/abstract=3401846