Do Actions Speak Louder Than Words?The Response of Asset Prices to Monetary Policy Actions and Statements

Refet Gürkaynak and Brian Sack
Authors registered in the RePEc Author Service: Refet S. Gürkaynak

No 323, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: We investigate the effects of U.S. monetary policy on asset prices using a high-frequency event-study analysis. We test whether these effects are adequately captured by a single factor—changes in the federal funds rate target—and find that they are not. Instead, we find that two factors are required. These factors have a structural interpretation as a “current federal funds rate target†factor and a “future path of policy†factor, with the latter closely associated with FOMC statements. We measure the effects of these two factors on bond yields and stock prices using a new intraday dataset going back to 1990. According to our estimates, both monetary policy actions and statements have important but differing effects on asset prices, with statements having a much greater impact on longer-term Treasury yields

JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Date: 2005-11-11
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Journal Article: Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements (2005)
Working Paper: Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements (2005)
Working Paper: Do actions speak louder than words? the response of asset prices to monetary policy actions and statements (2004)
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