Monetary Policy, Information and Country Risk Shocks in the Euro Area

Giovanni Ricco, Emanuele Savini and Anshumaan Tuteja

No 19679, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This study examines high-frequency market responses to ECB policy announcements, providing instrumental variables to identify four types of monetary policy shocks -- conventional policy, forward guidance, quantitative easing/tightening, and asymmetric country risk -- along with information shocks. Our findings show that non-linear information effects, especially prominent during episodes of acute market stress in euro area crises, are key to resolving puzzles in macroeconomic and financial variable responses reported in studies using high-frequency European data. The IVs obtained by controlling for these effects yield, in a VAR model, dynamic responses to monetary tightenings with contractionary impacts on output and prices.

Keywords: Monetary; policy (search for similar items in EconPapers)
JEL-codes: E32 E52 E58 (search for similar items in EconPapers)
Date: 2024-11
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