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Financial market reaction to Federal Reserve communications: Does the global financial crisis make a difference?

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  • Bernd Hayo
  • Ali Kutan
  • Matthias Neuenkirch

    ()

Abstract

This paper studies the effects of Federal Reserve communications on US financial market returns from 1998 to 2009 and asks whether they changed significantly during the global financial crisis of August 2007–July 2009. We find, first, that central bank communication moves financial markets in the intended direction. In particular, shorter maturities are affected in an economically meaningful way. Second, speeches by the chairman generate relatively larger market reactions than communication by other governors or presidents. Finally, central bank communication is even more market relevant during the subsample covering the global financial crisis. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Bernd Hayo & Ali Kutan & Matthias Neuenkirch, 2015. "Financial market reaction to Federal Reserve communications: Does the global financial crisis make a difference?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(1), pages 185-203, February.
  • Handle: RePEc:kap:empiri:v:42:y:2015:i:1:p:185-203
    DOI: 10.1007/s10663-014-9258-y
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    References listed on IDEAS

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    Cited by:

    1. repec:taf:apeclt:v:25:y:2018:i:4:p:278-282 is not listed on IDEAS
    2. Margarita Irizepova, 2015. "Methods of State’s Reaction to Risks of State Finances Management," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 129-136.
    3. repec:lde:journl:y:2017:i:87:p:67-95 is not listed on IDEAS
    4. Carlo Rosa, 2016. "Fedspeak: Who Moves U.S. Asset Prices?," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 223-261, December.
    5. Margarita Irizepova, 2015. "Historical Evolution of Economic Category “State Financial Reservesâ€," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 103-114.
    6. Domenico Lombardi & Pierre L. Siklos & Samantha St. Amand, 2019. "Asset Price Spillovers from Unconventional Monetary Policy: A Global Empirical Perspective," International Journal of Central Banking, International Journal of Central Banking, vol. 15(2), pages 43-74, June.
    7. Jieun Lee & Doojin Ryu & Ali M. Kutan, 2016. "Monetary Policy Announcements, Communication, and Stock Market Liquidity," Australian Economic Papers, Wiley Blackwell, vol. 55(3), pages 227-250, September.
    8. repec:col:000174:015708 is not listed on IDEAS

    More about this item

    Keywords

    Central bank communication; Federal Reserve; Global financial crisis; Financial markets; Monetary policy; E52; G14;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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