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Asset price reactions to RPI announcements

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  • M A S Joyce
  • V Read
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    Abstract

    UK asset price reactions to RPI announcements are examined from the early 1980s up to April 1997. Announcements are decomposed into their expected and unexpected components using survey data on inflation expectations. Asset prices do not appear to respond to the expected component of announcements, consistent with the predictions of the efficient markets hypothesis. The main sensitivity to inflation news appears in government bond prices, and the results are consistent with the 1992-97 inflation targeting regime being not fully credible, though its credibility increased over time.

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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1999/wp94.pdf
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    Bibliographic Info

    Paper provided by Bank of England in its series Bank of England working papers with number 94.

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    Date of creation: Mar 1999
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    Handle: RePEc:boe:boeewp:94

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    1. Cornell, Bradford, 1983. "The Money Supply Announcements Puzzle: Review and Interpretation," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 644-57, September.
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    Cited by:
    1. Andrew Clare & Roger Courtenay, 2001. "Assessing the impact of macroeconomic news announcements on securities prices under different monetary policy regimes," Bank of England working papers, Bank of England 125, Bank of England.
    2. Jones, Brad & Lin, Chien-Ting & Masih, A. Mansur M., 2005. "Macroeconomic announcements, volatility, and interrelationships: An examination of the UK interest rate and equity markets," International Review of Financial Analysis, Elsevier, Elsevier, vol. 14(3), pages 356-375.
    3. Balazs Egert, 2009. "The Impact of Monetary and Commodity Fundamentals, Macro News and Central Bank Communication on the Exchange Rate: Evidence from South Africa," CESifo Working Paper Series 2612, CESifo Group Munich.

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