How 'Unconventional' are Large-Scale Asset Purchases? The Impact of Monetary Policy on Asset Prices

Rosa, Carlo

doi:10.2139/ssrn.2053640

Cited by 75 publications

(56 citation statements)

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“…3 Rosa (2012) identifies the surprise component of asset purchases by the Fed using a methodology based upon interpreting the wording of related articles in the Financial Times. As he points out, though, the estimates of the response of US asset prices to his measure of unconventional policy shocks are surrounded by considerable statistical uncertainty and, overall, are not significantly different from the response to an unanticipated FFR cut.…”

Section: Data and Stylised Factsmentioning

confidence: 99%

Stock market reaction to fed funds rate surprises: State dependence and the financial crisis

Kontonikas

MacDonald

Saggu

2013

Journal of Banking & Finance

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Section: Data and Stylised Factsmentioning

confidence: 99%

Stock market reaction to fed funds rate surprises: State dependence and the financial crisis

Kontonikas

MacDonald

Saggu

2013

Journal of Banking & Finance

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“…Equities: Early researchers on unconventional monetary policy were a bit puzzled because a given LSAP-induced change in long yields did not raise equity prices as much as an equivalent change in long yields induced by an increase in the federal funds rate (Rosa (2012)). Indeed, Kiley (2014) shows that the correlation between long yield changes and equity returns is larger under conventional monetary policy.…”

Section: Us Treasury Housing and Corporate Bondsmentioning

confidence: 99%

An Analysis of the Literature on International Unconventional Monetary Policy

Bhattarai

Neely

2016

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This paper reviews and critically evaluates the empirical literature on the effects of U.S. unconventional monetary policy on both financial markets and the real economy. In order to understand how such policies could work, we also briefly review the literature on the theory of such policies. We show that event studies provide very strong evidence that U.S. unconventional policy announcements have strongly influenced international bond yields, exchange rates, and equity prices in the desired manner. In addition, such studies indicate that such policies curtailed market perceptions of extreme events. Calibrated modeling and vector autoregressive (VAR) exercises strongly suggest that these policies significantly improved macroeconomic outcomes, raising U.S. GDP and CPI, through these changes in asset prices. Both event studies and VARs imply positive international spillovers of such policies.

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“…The interval spans from 1 h before to 2 h after the event time. The vertical line is placed at the release time of the FOMC statement (see Rosa, 2012, for the exact time stamps of the FOMC meetings). Large and small filled squares denote significance of the differences at the two-sided 1 and 5 percent level respectively.…”

Section: Figure 1 the Volatility And Trading Volumes Of Crude Oil (Wtmentioning

confidence: 99%

“…Large and small filled squares denote significance of the differences at the two-sided 1 and 5 percent level respectively. Rosa (2012). The econometric method is Ordinary Least Squares with Heteroskedasticity-Consistent standard errors in brackets.…”

Section: Figure 1 the Volatility And Trading Volumes Of Crude Oil (Wtmentioning

confidence: 99%

“…impact of LSAP" reports the cumulative impact of the unexpected component of the LSAP announcements in a narrow window around the FOMC meetings expressed in federal funds target rate cut (in basis points), whereas the row "90% confidence interval" reports its 90% confidence interval. The superscripts *** , Rosa (2012). The econometric method is Ordinary Least Squares with Heteroskedasticity-Consistent standard errors.…”

Section: Figure 1 the Volatility And Trading Volumes Of Crude Oil (Wtmentioning

confidence: 99%

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The High-Frequency Response of Energy Prices to Monetary Policy: Understanding the Empirical Evidence

Rosa

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper examines the impact of conventional and unconventional monetary policy on energy prices, using an event study with intraday data. Three measures for monetary policy surprises are used: 1) the surprise change to the current federal funds target rate, 2) the surprise component to the future path of policy, and 3) the unanticipated announcements of future large-scale asset purchases (LSAPs). Estimation results show that monetary policy news has economically important and highly significant effects on the level and volatility of energy futures prices and their trading volumes. I find that, on average, a hypothetical unanticipated 100 basis point hike in the federal funds target rate is associated with roughly a 3 percent decrease in West Texas Intermediate oil prices. I also document that, in a narrow window around the Federal Open Market Committee meeting, the Federal Reserve's LSAP1 and LSAP2 programs have a cumulative financial market impact on crude oil equivalent to an unanticipated cut in the federal funds target rate of 155 basis points. Monetary policy affects oil prices mostly by affecting the value of the U.S. dollar exchange rate. Intraday energy prices also respond to news announcements about the U.S. macroeconomy and inventories. The daily responses are never significant, except in the case of inventory news.

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How 'Unconventional' are Large-Scale Asset Purchases? The Impact of Monetary Policy on Asset Prices

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Cited by 75 publications

References 5 publications

Stock market reaction to fed funds rate surprises: State dependence and the financial crisis

Stock market reaction to fed funds rate surprises: State dependence and the financial crisis

An Analysis of the Literature on International Unconventional Monetary Policy

The High-Frequency Response of Energy Prices to Monetary Policy: Understanding the Empirical Evidence

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