Using Intraday Data to Gauge Financial Market Responses to Federal Reserve and ECB Monetary Policy Decisions
Abstract
This paper examines bond and stock market volatility reactions in the euro area and the United States following their respective economies’ monetary policy decisions, over a uniform sample period (April 1999–May 2006). For this purpose, intraday data on the U.S. and euro-area bond and stock markets are used. A strong upsurge in intraday volatility at the time of the release of the monetary policy decisions by the two central banks is found, which is more pronounced for the U.S. financial markets following Federal Reserve monetary policy decisions. Part of the increase in intraday volatility in the two economies surrounding monetary policy decisions can be explained by both news of the level of monetary policy and revisions in the expected future monetary policy path. The observed strong discrepancy between asset-price reactions in the United States and in the euro area following monetary policy decisions still remains a puzzle, although some tentative explanations are provided in the paper.Download Info
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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.
Volume (Year): 6 (2010)
Issue (Month): 2 (June)
Pages: 117-146
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Related research
Keywords:Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Hussain, Syed Mujahid, 2011. "Simultaneous monetary policy announcements and international stock markets response: An intraday analysis," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 752-764, March.
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