Download This PaperDeciphering Monetary Policy Shocks
86 Pages Posted: 15 Apr 2022 Last revised: 17 Oct 2023
Date Written: September 29, 2023
Abstract
We decipher monetary policy shocks by showing that asset price reactions to policy announcements can be directly connected to topic-specific communication by the central bank. The asset price responses to news about topics such as 'rate guidance', 'economic activity', or 'financial and monetary conditions' are economically intuitive but exhibit substantial variation over time. This variation implies that communication is a flexible, state-contingent policy tool, but poses a challenge to the interpretation of monetary policy shocks solely identified from high-frequency asset price changes. Our results suggest that changes in the impact of communication are due to shifts in market perceptions.
Keywords: Monetary Policy Shocks, Central Bank Communication, Asset Pricing, Textual Analysis
JEL Classification: G10, G12, E43, E44, E52, E58
Suggested Citation: Suggested Citation
Gnan, Phillipp and Schleritzko, Maximilian and Schmeling, Maik and Wagner, Christian, Deciphering Monetary Policy Shocks (September 29, 2023). Available at SSRN: https://ssrn.com/abstract=4074113 or http://dx.doi.org/10.2139/ssrn.4074113
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