Working Paper: CEPR ID: DP13759
Authors: Carlo Altavilla; Luca Brugnolini; Refet S. Gürkaynak; Roberto Motto; Giuseppe Ragusa
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: ECB; policy surprise; event study; intraday; persistence; asymmetry
JEL Codes: E43; E44; E52; E58; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ECB monetary policy communication (E52) | asset prices (G19) |
| policy target surprises (E61) | short end of the yield curve (E43) |
| timing and forward guidance surprises (E60) | longer-term yields (E43) |
| QE surprises (C54) | yields (G12) |
| QE surprises (C54) | narrowing of spreads (G19) |
| QE surprises (C54) | lowering of yields (E43) |
| U.S. initial jobless claims surprises (J65) | asset prices (G19) |