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ECB monetary policy surprises: identification through cojumps in interest rates

  • Winkelmann, Lars
  • Bibinger, Markus
  • Linzert, Tobias
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    We propose a new monetary policy surprise measure based on cojumps in tick-data of a short and long term interest rate. We extend a recently proposed test for cojumps to distinguish policy announcements that shift the short and long end of the yield curve in the same direction (level shift) and policy announcements that shift both ends in opposite directions (rotation). Through level shifts and rotations we identify the source of a policy surprise in a standard Taylor-rule context. Empirical evidence on 133 ECB policy announcements from 2001 to 2012 suggest that markets perceptions about ECB policy preferences has been remarkably stable.

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    File URL: http://econstor.eu/bitstream/10419/79721/1/VfS_2013_pid_448.pdf
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    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79721.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:79721
    Contact details of provider: Web page: http://www.socialpolitik.org/
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    16. Ehrmann, Michael & Fratzscher, Marcel, 2007. "Explaining monetary policy in press conferences," Working Paper Series 0767, European Central Bank.
    17. Edda Claus & Mardi Dungey, 2012. "U.S. Monetary Policy Surprises: Identification with Shifts and Rotations in the Term Structure," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(7), pages 1443-1453, October.
    18. Dungey, Mardi & McKenzie, Michael & Smith, L. Vanessa, 2009. "Empirical evidence on jumps in the term structure of the US Treasury Market," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 430-445, June.
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