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The Impact of Monetary Policy Surprises on Australian Financial Futures Markets

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  • Xinsheng Lu

    (Department of Economics and Finance, Tongji University, China)

  • Ying Zhou

    ()
    (Department of Economics, Auckland University of Technology)

  • Mingting Kou

    (Business School, Datong University, China)

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    Abstract

    This paper investigates the impact of unanticipated Australian monetary policy changes on AUD/USD exchange rate futures, 3-year and 10-year Australian Treasury bond futures, during the period from January 1997 to April 2010. Our study contributes to the literature by using both 30-day and 90-day bank accepted bill (BAB) rates to disentangle anticipated from surprise cash rate target changes in the Australian money market, and by concurrently modelling the effects of monetary surprises and other key macroeconomic announcements in Australia. The empirical results suggest that the 30-day BAB rate is served as the best proxy for the expected monetary policy actions. Further, the effect of Australian monetary surprises on volatility of all futures instruments is significant and complete when other key macroeconomic announcements are considered simultaneously.

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    File URL: http://www.aut.ac.nz/__data/assets/pdf_file/0006/336219/Economics-WP-2013-01.pdf
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    Bibliographic Info

    Paper provided by Auckland University of Technology, Department of Economics in its series Working Papers with number 2013-01.

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    Length: 32 pages
    Date of creation: Jan 2013
    Date of revision:
    Handle: RePEc:aut:wpaper:201301

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    Keywords: monetary policy surprises; financial futures; asset return volatility;

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