Money Talks: How Foreign and Domestic Monetary Policy Communications Move Financial Markets

Rodrigo Sekkel, Henry Stern and Xu Zhang

Staff Working Papers from Bank of Canada

Abstract: We provide novel insights into how foreign and domestic monetary policy communications, beyond rate announcements, affect the financial markets of open economies. We construct a high-frequency dataset that documents the impact of Federal Reserve (Fed) and Bank of Canada (BoC) rate announcements, speeches, press conferences and minutes releases to Canadian financial markets between 1997 and 2023. We find that non-rate announcements are a significant source of domestic monetary policy surprises and international spillovers. Across event types, Fed communications are particularly influential for long-term interest rates and stock futures while BoC communications matter more to short-term interest rates. Since BoC communications have little effect on U.S. interest rates, Canadian announcements have a greater impact on the CAD/USD exchange rate by inducing larger changes in the cross-country interest rate differential.

Keywords: Asset pricing; Central bank research; Exchange rates; Financial markets; Interest rates; International financial markets; Monetary policy (search for similar items in EconPapers)
JEL-codes: E52 F31 G15 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2025-11
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-ifn, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:25-33

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