Monetary policy and information production in the secondary market

Samer Adra and Elie Menassa

Economics Letters, 2021, vol. 207, issue C

Abstract: This paper studies the effect of Federal Reserve decisions on information production in the secondary market. We distinguish conventional monetary shocks from those conveying new economic information. Monetary contraction in the conventional sense leads information-driven traders to intensify their information production activity. In contrast, monetary contraction that conveys positive economic news reduces information production in the secondary market. In terms of influencing price informativeness, the Fed’s information shocks are more impactful than the conventional shocks.

Keywords: Federal Reserve; Informed trading; Monetary policy; Information shocks (search for similar items in EconPapers)
JEL-codes: E52 E58 G14 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:207:y:2021:i:c:s0165176521003219

DOI: 10.1016/j.econlet.2021.110044

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