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Financial Market Reaction to Federal Reserve Communications: Does the Crisis Make a Difference?

Bernd Hayo (), Ali Kutan () and Matthias Neuenkirch ()

No 200808, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: This paper studies the effects of Federal Reserve communications on US financial market returns from 1998 to 2009 and asks whether a significant change occurred during the financial crisis of August 2007–December 2009. We find, first, that central bank communication moves financial markets in the intended direction. In particular, shorter maturities are affected in an economically meaningful way. Second, speeches by the Chairman generate relatively more public attention than communication by other governors or presidents. Finally, central bank communication is even more market relevant during the financial crisis subsample.

Keywords: Central Bank Communication; Federal Reserve; Financial Crisis; Financial Markets; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E52 G14 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200808

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