Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements

Refet Gürkaynak, Brian Sack and Eric Swanson

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the effects of U.S. monetary policy on asset prices using a high-frequency event-study analysis. We test whether these effects are adequately captured by a single factor-changes in the federal funds rate target - and find that they are not. Instead, we find that two factors are required. These factors have a structural interpretation as a "current federal funds rate target" factor and a "future path of policy" factor, with the latter closely associated with Federal Open Market Committee statements.We measure the effects of these two factors on bond yields and stock prices using a new intraday data set going back to 1990. According to our estimates, both monetary policy actions and statements have important but differing effects on asset prices, with statements having a much greater impact on longer-term Treasury yields.

Keywords: Monetary Policy; Asset Prices; Factor Analysis; Multi-dimensional Policy (search for similar items in EconPapers)
JEL-codes: G0 G00 (search for similar items in EconPapers)
Date: 2005-02-08
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1108)

Published in International Journal of Central Banking Number 1.Volume(2005): pp. 55-93

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Related works:
Journal Article: Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements (2005)
Working Paper: Do Actions Speak Louder Than Words?The Response of Asset Prices to Monetary Policy Actions and Statements (2005)
Working Paper: Do Actions Speak Louder than Words? The Response of Asset Prices to Monetary Policy Actions and Statements (2005)
Working Paper: Do actions speak louder than words? the response of asset prices to monetary policy actions and statements (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:820

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