Delphic and Odyssean monetary policy shocks: Evidence from the euro-area

Filippo Ferroni

No 60, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: We use euro intraday data to identify monetary policy surprises in the euro area. We find that communication right after the Governing Council meetings convey information that moves the yield curve far out. Moreover, the nature of information revealed via this communication changed over time. Until 2013, unexpected variations in future interest rates were positively correlated with changes in market-based measure of inflation expectations consistent with news on future macroeconomic conditions. That negative correlation disappeared roughly when forward guidance on future rates started to be given by the Governing Council. We use sign restrictions on the joint reaction of expected interest rates and inflation rates to the announcements to disentangle two types of monetary policy surprises: one about the future state of the economy (Delphic); the other about the future stance of the monetary authority (Odyssean). We find that a surprise that lowers future interest rates does not engineer a boom. By contrast, a surprise that lowers future interest rates because it signals future accommodation does.

Date: 2018
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Citations: View citations in EconPapers (43)

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Related works:
Journal Article: Delphic and odyssean monetary policy shocks: Evidence from the euro area (2021)
Working Paper: Delphic and Odyssean Monetary Policy Shocks: Evidence from the Euro Area (2019)
Working Paper: Delphic and Odyssean Monetary Policy Shocks: Evidence from the Euro Area (2018)
Working Paper: Delphic and Odyssean monetary policy shocks: Evidence from the euro-area (2016)
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