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Macroeconomic news and asset prices before and after the zero lower bound

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Abstract

With short-term policy interest rates constrained by their effective zero lower bound (ZLB), monetary policy relied on communicating the future path of policy conditional on incoming macroeconomic data. Motivated by this, we exploit intra-day prices to investigate how updates on the state of the U.S. economy affect interest rates and exchange rates before and after the ZLB. We find that releases reflecting the dual mandate of the Fed rose in importance and – as an ex-post acknowledgement of the sources of the Great Recession – additional housing market indicators and GDP revisions, that hitherto left markets unaffected, became market movers.

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  • Koch, Christoffer & Yung, Julieta, 2016. "Macroeconomic news and asset prices before and after the zero lower bound," Globalization and Monetary Policy Institute Working Paper 287, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:287
    DOI: 10.24149/gwp287
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    File URL: http://www.dallasfed.org/assets/documents/institute/wpapers/2016/0287.pdf
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    1. Eric T. Swanson & John C. Williams, 2014. "Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates," American Economic Review, American Economic Association, vol. 104(10), pages 3154-3185, October.
    2. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    3. Leonardo Bartolini & Linda S. Goldberg & Adam Sacarny, 2008. "How economic news moves markets," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 14(Aug).
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    Cited by:

    1. Frankel, Jeffrey & Saiki, Ayako, 2016. "Does It Matter If Statistical Agencies Frame the Month's CPI Report on a 1-Month or 12-Month Basis?," Working Paper Series 16-011, Harvard University, John F. Kennedy School of Government.

    More about this item

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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