Measuring euro area monetary policy

Altavilla, Carlo; Brugnolini, Luca; Gürkaynak, Refet S.; Motto, Roberto; Ragusa, Giuseppe

doi:10.1016/j.jmoneco.2019.08.016

Cited by 373 publications

(394 citation statements)

References 9 publications

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“…Moreover, we show that they do not depend on the particular horizon of the swap rate we use and that they do not capture an industry or seasonality effect. We also show that shortening the window around the announcement, following recent work by Altavilla et al (2019), produces qualitatively similar results as well.…”

Section: Introductionsupporting

confidence: 75%

“…We follow Corsetti et al (2018), who choose a 6-hour window from 13:00 to 19:00 CET, that match the closing times of the Tokyo and London stock exchanges, respectively. While a shorter window could purge stock returns from noise unrelated to monetary policy announcements, some of our stocks are relatively illiquid and infrequently traded, and hence may not react to new information instantaneously, unlike the components of the S&P 500 studied by Gorodnichenko and Weber (2016) or the sovereign bold yields and major stock market indexes studied by Altavilla et al (2019). Hence, our choice is a compromise between the narrower windows used in these studies and the wider (daily) ones used in other settings (for example in Bernanke and Kuttner, 2005).…”

Section: Monetary Policy Shocksmentioning

confidence: 99%

“…Hence, our choice is a compromise between the narrower windows used in these studies and the wider (daily) ones used in other settings (for example in Bernanke and Kuttner, 2005). We will return on this issue in Section 5.2, where we re-estimate our baseline regressions using the dataset of high-frequency monetary policy shocks recently made available by Altavilla et al (2019).…”

Section: Monetary Policy Shocksmentioning

confidence: 99%

See 2 more Smart Citations

Monetary Policy and the Cost of Wage Rigidity: Evidence from the Stock Market

Faia

Pezone

2018

SSRN Journal

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Using a unique confidential contract level dataset merged with firm-level asset price data, we find robust evidence that firms' stock market valuations and employment levels respond more to monetary policy announcements the higher the degree of wage rigidity. Data on the renegotiations of collective bargaining agreements allow us to construct an exogenous and accurate measure of wage rigidity. The amplification induced by wage rigidity is stronger for firms with high labor intensity and low profitability. There are clear distributional consequences of monetary policy. We rationalize the evidence through a model in which firms in different sectors feature different degrees of wage rigidity due to staggered renegotiations visa -vis unions.

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Section: Introductionsupporting

confidence: 75%

Section: Monetary Policy Shocksmentioning

confidence: 99%

Section: Monetary Policy Shocksmentioning

confidence: 99%

See 1 more Smart Citation

Monetary Policy and the Cost of Wage Rigidity: Evidence from the Stock Market

Faia

Pezone

2018

SSRN Journal

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“…SeeBlinder, Ehrmann, de Haan, Fratzscher and Jansen (2008) for a general survey.3 Paul (forthcoming) shows this remains valid for the more recent period with some variation over time. 4 See alsoBrand, Buncic and Turunen (2010), Jardet and Monks (2014), Leombroni, Vendolin, Venter and Whelan (2017) andAltavilla, Brugnolini, Gürkaynak, Motto and Ragusa (2019) for similar results in the euro area.5 Hubert and Labondance (2018) find that ECB forward guidance announcements lowered the yield curve, even after they control for the macroeconomic information published by the ECB.…”

mentioning

confidence: 93%

Delphic and Odyssean Monetary Policy Shocks: Evidence from the Euro Area

Andrade

Ferroni

2019

Federal Reserve Bank of Boston Research Department Working Papers

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What drives the strong reaction of financial markets to central bank communication on the days of policy decisions? We highlight the role of two factors that we identify from highfrequency monetary surprises: news on future macroeconomic conditions (Delphic shocks) and news on future monetary policy shocks (Odyssean shocks). These two shocks move the yield curve in the same direction but have opposite effects on financial conditions and macroeconomic expectations. A drop in future interest rates that is associated with a negative Delphic (Odyssean) shock is perceived as being contractionary (expansionary). These offsetting effects can explain why central bank communication leads to a strong reaction of the yield curve together with a weak reaction by inflation expectations or stock prices. The two shocks also have different impacts on macroeconomic outcomes, such that central bankers cannot infer the degree of stimulus they provide by looking at the mere reaction of the yield curve. However, changes in their communication policy can influence the way markets predominantly understand communication about future interest rates. JEL Classifications: E52, E32, C10

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“…These capture the "surprise" component of policy since the only substantive macroeconomic news within the window pertains to monetary policy. This helps us to overcome the potential endogeneity issue in that monetary policy may depend on bank lending, or both could be driven by omitted (and uncontrolled for) third factors.The EA monetary policy surprises are constructed byAltavilla et al (2019), and measure intraday moves in overnight indexed swap (OIS) rates around ECB policy announcements and press…”

mentioning

confidence: 99%

Le Pont de Londres: Interactions Between Monetary and Prudential Policies in Cross-Border Lending

et al. 2020

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By combining analysis of two unique confidential datasets, we examine how euro-area (EA) monetary policy and recipient-country prudential policy interact to influence the cross-border lending of French banks from France and the UK. We find that monetary spillovers via cross-border lending can be partially offset by prudential measures in receiving countries. We then explore heterogeneities in that interaction, specifically the difference made by bank size and location of the affiliate (French headquarters vs. affiliates based in the UK, an international financial centre). Focusing on lending from France, we find that the response of GSIBs' lending to EA monetary policy is less sensitive to recipient-country prudential policy than non-GSIBs'. In contrast, the response of lending to EA monetary policy from French-owned GSIB affiliates in the UK is sensitive to recipient-country prudential policy. We also find evidence that French GSIBs channel funds towards the UK in response to EA monetary policy, in a manner that is dampened by the global prudential policy setting. Together, these findings suggest the existence of a 'London Bridge': conditional on EA monetary policy, French GSIBs adjust their funds in the UK in response to global prudential policies and, from there, lend to third countries, responding to local prudential policies. French GSIBs' cross-border lending from their headquarters to EA monetary policy responds differently to foreign prudential policies than their lending from international financial centres. Finally, we find evidence of a similar pattern for all EA-owned bank affiliates in the UK, suggesting a broader relevance of the London Bridge.

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Measuring euro area monetary policy

Cited by 373 publications

References 9 publications

Monetary Policy and the Cost of Wage Rigidity: Evidence from the Stock Market

Monetary Policy and the Cost of Wage Rigidity: Evidence from the Stock Market

Delphic and Odyssean Monetary Policy Shocks: Evidence from the Euro Area

Le Pont de Londres: Interactions Between Monetary and Prudential Policies in Cross-Border Lending

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