Non-monetary news in central bank communication

Cieślak, Anna; Schrimpf, Andreas

doi:10.1016/j.jinteco.2019.01.012

Cited by 296 publications

(168 citation statements)

References 43 publications

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“…Assuming that stronger expected growth boosts future profits and dividends, the rise in interest rates following such communications should be coupled with higher stock prices (see Cieslak and Schrimpf, 2019). Thus, we classify FOMC announcements around which interest rates and stock prices move in the same direction as ones in which "growth shocks" dominate, while "monetary shocks" are ones in which interest rates and stock prices move in opposite directions.…”

Section: Spillovers From Monetary News Vs Growth Newsmentioning

confidence: 99%

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When is Bad News Good News? U.S. Monetary Policy, Macroeconomic News, and Financial Conditions in Emerging Markets

Hoek

Kamin

Yoldaş

2020

internationalfinance

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Rises in U.S. interest rates are often thought to generate adverse spillovers to emerging market economies (EMEs). We show that what appears to be bad news for EMEs might actually be good news, or at least not-so-bad news, depending on the source of the rise in U.S. interest rates. We present evidence that higher U.S. interest rates stemming from stronger U.S. growth generate only modest spillovers, while those stemming from a more hawkish Fed policy stance or inflationary pressures can lead to significant tightening of EME financial conditions. Our identification of the sources of U.S. rate changes is based on high-frequency moves in U.S. Treasury yields and stock prices around FOMC announcements and U.S. employment report releases. We interpret positive comovements of stocks and interest rates around these events as growth shocks and negative comovements as monetary shocks, and estimate the effect of these shocks on emerging market asset prices. For economies with greater macroeconomic vulnerabilities, the difference between the impact of monetary and growth shocks is magnified. In fact, for EMEs with very low levels of vulnerability, a growth-driven rise in U.S. interest rates may even ease financial conditions in some markets.

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Section: Spillovers From Monetary News Vs Growth Newsmentioning

confidence: 99%

“…Therefore, monetary shocks driven by higher inflation are cases where inflationary pressures either dominate growth effects, or emerge from a negative supply shock that reduces growth, or emerge independently from growth. 3 SeeNakamura and Steinsson (2018),Cieslak and Schrimpf (2019), and Jarocinski and Karadi (2019).…”

mentioning

confidence: 99%

When is Bad News Good News? U.S. Monetary Policy, Macroeconomic News, and Financial Conditions in Emerging Markets

Hoek

Kamin

Yoldaş

2020

internationalfinance

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“…15 See for instance Cook and Hahn (1989), Kuttner (2001), Cochrane andPiazzesi 2002, andGertler andKaradi (2015) 16 See for instance Romer and Romer (2000), Campbell et al (2012), Nakamura and Steinsson (2018), Miranda-Agrippino and Ricco (2015), Jarociski and Karadi (2018), Lunsford (2018) or Cieslak and Schrimpf (2019). period poses challenges beyond the interpretation as policy shocks or Fed information effects.…”

Section: Monetary Policy News Identified Using the High Frequency Appmentioning

confidence: 99%

“…See for instanceLucca and Trebbi (2009),Campbell et al (2012),Del Negro, Giannoni, and Patterson (2015),Altavilla and Giannone (2017),Nakamura and Steinsson (2018), andCieslak and Schrimpf (2019).…”

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confidence: 99%

Do Monetary Policy Announcements Shift Household Expectations?

Lewis¹,

Makridis²,

Mertens³

2019

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We use daily survey data from Gallup to assess whether households' beliefs about economic conditions are influenced by surprises in monetary policy announcements. We first provide more general evidence that public confidence in the state of the economy reacts to certain types of macroeconomic news very quickly. Next, we show that surprises to the Federal Funds target rate are among the news that have statistically significant and instantaneous effects on economic confidence. In contrast, surprises about forward guidance and asset purchases do not have similar effects on household beliefs, perhaps because they are less well understood. We document heterogeneity in the responsiveness of sentiment across demographics.

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“…In Section 6 we explore formulations that provide more structural interpretations of the policy shocks. In particular, as action vs. statement policy shocks (e.g., Gürkaynak et al, 2005a) or pure policy vs. information shocks about the future state of the economy (e.g., Cieslak and Schrimpf, 2018;Nakamura and Steinsson, 2018). Throughout, however, we maintain the orthogonality assumption.…”

Section: Benchmark Policy Shocksmentioning

confidence: 99%

MoNK: Mortgages in a New-Keynesian Model

Garriga¹,

Kydland²,

Šustek³

2019

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We propose a tractable framework for monetary policy analysis in which both short-and long-term debt affect equilibrium outcomes. This objective is motivated by observations from two literatures suggesting that monetary policy contains a dimension affecting expected future interest rates and thus the costs of long-term financing. In New-Keynesian models, however, long-term loans are redundant assets. We use the model to address three questions: what are the effects of statement vs. action policy shocks; how important are standard New-Keynesian vs. cash flow effects in their transmission; and what is the interaction between these two effects? JEL Classification Codes: E52, G21, R21.

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Non-monetary news in central bank communication

Cited by 296 publications

References 43 publications

When is Bad News Good News? U.S. Monetary Policy, Macroeconomic News, and Financial Conditions in Emerging Markets

When is Bad News Good News? U.S. Monetary Policy, Macroeconomic News, and Financial Conditions in Emerging Markets

Do Monetary Policy Announcements Shift Household Expectations?

MoNK: Mortgages in a New-Keynesian Model

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