A statistical approach to identifying ECB monetary policy

Yıldız Akkaya, Lea Bitter, Claus Brand and Luís Fonseca

No 2994, Working Paper Series from European Central Bank

Abstract: We construct monetary policy indicators from high-frequency asset price changes following policy announcements, emphasising the concentration of asset price responses along specific dimensions and their leptokurtic distribution. Traditionally, these dimensions are identified by rotating principal components based on economic assumptions that overlook information in excess kurtosis. We employ Varimax rotation, leveraging excess kurtosis without using economic restrictions. Within a set of euro-area risk-free assets Varimax validates policy news along dimensions previously derived from structural identification approaches and rejects evidence of macroinformation shocks. Yet, once adding risky assets Varimax identifies only one risk-free factor in medium- to long-term yields and instead points to additional risk-shift factors. JEL Classification: E43, E52, E58, C46, G14

Keywords: event study; fat tails; high-frequency identification; monetary policy instruments; Varimax (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
Note: 92649
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2994~6c2bcefa86.en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242994

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().