Deciphering Monetary Policy Shocks

86 Pages Posted: 15 Apr 2022 Last revised: 17 Oct 2023

See all articles by Phillipp Gnan

Phillipp Gnan

Vienna University of Economics and Business

Maximilian Schleritzko

d-fine GmbH

Maik Schmeling

Goethe University Frankfurt - Department of Finance; Centre for Economic Policy Research (CEPR)

Christian Wagner

WU Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

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

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

Phillipp Gnan

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Maximilian Schleritzko

d-fine GmbH ( email )

An der Hauptwache 7
Frankfurt, 60313
Germany

Maik Schmeling

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

HOME PAGE: http://sites.google.com/site/maikschmeling/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Christian Wagner (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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