Nominal interest rates and the news

Michael Bauer

No 2011-20, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: How do interest rates react to news? This paper presents a new methodology, based on a simple dynamic term structure model, which provides for an integrated analysis of the effects of monetary policy actions and macroeconomic news on the term structure of interest rates. I find several new empirical results: First, monetary policy directly affects distant forward rates. Second, policy news is more complex than macro news. Third, while payroll news causes the most action in interest rates, it does not affect distant forward rates. Fourth, the term structure response to macro news is consistent with considerable interest rate smoothing.

Keywords: Interest rates; Monetary policy (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Journal Article: Nominal Interest Rates and the News (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2011-20

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