Model-free jump measures and interest rates: common patterns in US and UK monetary policy around major economic events

Januj Juneja and Kuntara Pukthuanthong

The European Journal of Finance, 2016, vol. 22, issue 14, 1388-1413

Abstract: We employ model-free jump measures to study monetary policy operations in the UK and USA around major economic events by exploiting the relationship between jumps, interest rates, and macroeconomic news releases related to monetary policy. In our analysis, we explicitly account for the timing of jumps in UK and US interest rates and the correlation across jumps in the same two interest rates and whether these match Federal Open Market Committee (FOMC)/Monetary Policy Committee news releases. We find that FOMC news releases lag jumps in US interest rates, but lead jumps in UK Gilt rates. Overall, our analysis suggests that US Treasury Bills react to information in the aforementioned news releases before their announcement while UK Gilt yields react after them and that the Fed and Bank of England react similarly around major economic events.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:22:y:2016:i:14:p:1388-1413

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DOI: 10.1080/1351847X.2015.1092164

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