Do central bank words matter in emerging markets? Evidence from Mexico

Pavel Solís

Journal of Macroeconomics, 2023, vol. 78, issue C

Abstract: This paper analyzes the price and quantity effects of monetary policy statements in an emerging market economy. Surprises in monetary policy are identified using intraday data on asset prices around monetary policy announcements in Mexico. I find that asset prices and the portfolio flows of domestic and foreign investors respond strongly and persistently to both news about the policy rate and guidance about its future path communicated via statements. The ability to manage expectations about future policy via statements is thus not exclusive to central banks in advanced economies and does not require the zero lower bound to be binding.

Keywords: Monetary policy surprises; Exchange rate; Yield curve; Portfolio flows; Emerging markets; High-frequency data (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 F31 G14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:78:y:2023:i:c:s0164070423000708

DOI: 10.1016/j.jmacro.2023.103570

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