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“European Government Bond Markets and Monetary Policy Surprises: Returns, Volatility and Integration”

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  • Pilar Abad

    ()
    (University Rey Juan Carlos and University of Barcelona)

  • Helena Chuliá

    ()
    (Faculty of Economics, University of Barcelona)

Abstract

In this paper we investigate the response of bond markets to euro area and US monetary policy shocks. Specifically, we analyze the effect of unexpected changes in interest rates implemented by the European Central Bank (ECB) and the Federal Open Market Committee (FOMC) not only on the returns, but also on the volatility and the integration of European government bond markets. For all three characteristics our results show that the response to monetary policy surprises varies across groups of countries (EMU EU-15 central, EMU EU-15 peripheral, non-EMU EU-15 and non-EMU new EU). We also find that the effects of monetary policy announcements on the level of integration are more pronounced than those on returns and volatility. Finally, our results paint a complex picture of the effects of monetary policy news releases on the level of integration. The effect of ECB monetary policy surprises differs across old and new European Union members, while the effect of FOMC monetary policy surprises differs across EMU and non-EMU members.

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File URL: http://www.ub.edu/irea/working_papers/2013/201325.pdf
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Bibliographic Info

Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 201325.

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Length: 25 pages
Date of creation: Dec 2013
Date of revision: Dec 2013
Handle: RePEc:ira:wpaper:201325

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Web page: http://www.ub.edu/irea/
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Related research

Keywords: Monetary policy announcements; Bond market integration; Interest rate surprises. JEL classification: E44; F36; G15.;

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