Central Bank Communication and Correlation between Financial Markets: Canada and the United States
AbstractWe study the correlation between pairs of bond and stock markets in Canada and the United States between January 1998 and December 2009 in the framework of diagonal-BEKK models. Our research question is whether monetary policy actions and communications by the Bank of Canada and the Federal Reserve significantly affect the conditional co-movement of financial markets (i) within Canada and (ii) between Canada and the United States. We find that central bank communication significantly increases the correlation of financial markets within and across the two countries and is particularly important for the correlation of Canadian and US long-term interest rates.
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Bibliographic InfoPaper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201201.
Length: 22 pages
Date of creation: 2012
Date of revision:
Publication status: Forthcoming in
Bank of Canada; Central Bank Communication; Diagonal-BEKK Models; Dynamic Correlations; Federal Reserve; Financial Markets;
Other versions of this item:
- Melanie-Kristin Beck & Bernd Hayo & Matthias Neuenkirch, 2013. "Central bank communication and correlation between financial markets: Canada and the United States," International Economics and Economic Policy, Springer, vol. 10(2), pages 277-296, June.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F30 - International Economics - - International Finance - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-18 (All new papers)
- NEP-CBA-2012-01-18 (Central Banking)
- NEP-FMK-2012-01-18 (Financial Markets)
- NEP-MAC-2012-01-18 (Macroeconomics)
- NEP-MON-2012-01-18 (Monetary Economics)
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