Monetary Transmission with Frequent Policy Events

We empirically examine the role of both official monetary policy announcements and policymakers’ speeches in the transmission of monetary policy to financial markets and the real economy in the euro area. Using intraday data covering a broad cross-section of financial assets, we construct the Euro Area Extended Monetary Policy Event-Study Database (EA-EMPD). We refine the identification of monetary policy surprises by exploiting granular, quote-level data on individual participants’ bid and ask submissions. This novel dataset expands the set of identifiable policy events by an order of magnitude relative to databases based solely on scheduled rate-setting meetings. Our analysis yields three main findings. First, speeches by euro area policymakers exert statistically and economically significant effects on asset prices across maturities, with magnitudes comparable to those observed following official policy announcements. Second, the transmission of speech-induced short-rate changes to the real economy closely mirrors that of policy decisions and combining both types of surprises significantly enhances the precision of statistical inference. Finally, when speeches are included in the measurement of policy surprises, the share of real-economy variance attributable to monetary policy increases fivefold, although its absolute magnitude remains relatively modest.