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

Refet Gürkaynak, Brian Sack and Eric Swanson
Additional contact information
Brian Sack: Macroeconomic Advisers, LLC, Washington DC
Eric Swanson: Division of Monetary Affairs, Federal Reserve Board, Washington DC

International Journal of Central Banking, 2005, vol. 1, issue 1

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.

JEL-codes: E43 E52 E58 G14 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1071)

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Related works:
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 (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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