Working Paper: NBER ID: w19523
Authors: Linda S. Goldberg; Christian Grisse
Abstract: Although the effects of economic news announcements on asset prices are well established, these relationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high frequency data from January 2000 through August 2011. Significant time variation in news effects is present for those announcements that have the largest effects on asset prices. The time variation in effects is explained by economic conditions, including the level of policy rates at the time of the release, and risk conditions: government bond yields increase in response to "good news", but less so when risk is elevated. Risk conditions matter since they can capture the effects of uncertainty on the information content of news announcements, the interaction of monetary policy and financial stability objectives of central banks, and the effect of news announcements on the risk premium.
Keywords: Asset Prices; Macroeconomic Announcements; Time Variation; Yield Curves; Exchange Rates
JEL Codes: E43; E44; E52; F31; G12; G14; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| macroeconomic conditions (E66) | government bond yields (E43) |
| positive economic news (F69) | government bond yields (E43) |
| risk conditions (I12) | government bond yields (E43) |
| VIX index (G12) | risk conditions (I12) |
| policy rates (E43) | bond yield response to nonfarm payrolls announcements (E43) |
| central bank policies (E58) | market responses to economic data (E39) |