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Euro Area Monetary Communications: Excess Sensitivity and Perception Shocks

Author

Listed:
  • Valentin Jouvanceau

    (Bank of Lithuania)

  • Ieva Mikaliunaite

    (Bank of Lithuania)

Abstract

We explore new dimensions of the ECB’s monetary communications using the Euro Area Monetary Policy Event-Study Database (EA-MPD) built by Altavilla et al. (2019). We find that three new factors are needed to capture an excess sensitivity of long-term sovereign yields around monetary announcements. "Duration" surprises cause variations in real long-term rates and are mainly transmitted by term premiums. The "Sovereign spread" and "Save the Euro" surprises greatly influence the long-term yields of the periphery countries. These effects are difficult to reconcile with classic monetary policy shocks. We therefore study their underlying nature and discover that they have the characteristics of "Information", or what we label "Perception" shocks.

Suggested Citation

  • Valentin Jouvanceau & Ieva Mikaliunaite, 2020. "Euro Area Monetary Communications: Excess Sensitivity and Perception Shocks," Bank of Lithuania Working Paper Series 79, Bank of Lithuania.
    • Handle: RePEc:lie:wpaper:79
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    Cited by:

    1. Jouvanceau, Valentin & Mikaliunaite-Jouvanceau, Ieva, 2023. "ECB monetary communications: Market fragmentation at stake," Economics Letters, Elsevier, vol. 225(C).

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    More about this item

    Keywords

    Monetary surprises; Event-study; Excess sensitivity; Perception shocks; High-frequency Identification;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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