Monetary policy surprises, central bank information shocks, and economic activity in a small open economy

Arbeitspapier

In this paper I study the effects of monetary policy on economic activity and asset prices in Sweden, separately identifying the effects of a conventional policy change from effects of new information about economic fundamentals. Recent research has shown that high-frequency changes in policy interest rate futures prices around central bank policy announcements might not only contain monetary policy shocks but also central bank information shocks. I add to this line of research by studying a case where the central bank, in contrast to many other central banks studied in this literature, is very open and transparent about the monetary policy decision and publishes a full set of forecasts including the interest rate at the same moment as the decision is revealed. I use this information to construct an informationally-robust instrument for monetary policy shocks as the component of high-frequency market surprises triggered by policy announcements that is orthogonal to both central bank's economic projections, including policy rate projections, and to past market surprises. I also add sign restrictions on stock market changes around the announcement to separate structural monetary policy shock from central bank information shocks. In contrast to recent work for other countries, I do not find that separating monetary policy shocks from central bank information shocks is important to measure the effects of monetary policy in Sweden.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Sveriges Riksbank Working Paper Series ; No. 396

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Multiple or Simultaneous Equation Models: Instrumental Variables (IV) Estimation ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Price Level; Inflation; Deflation ; Interest Rates: Determination, Term Structure, and Effects ; Financial Markets and the Macroeconomy ; Monetary Policy ; Central Banks and Their Policies ; Information and Market Efficiency; Event Studies; Insider Trading
• Thema: Monetary Policy ; External Instruments ; Monetary Policy Surprises ; Information Effect ; Small Open Economy ; Exchange Rate ; Stock Prices ; House Prices

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Laséen, Stefan
• Ereignis: Veröffentlichung
• (wer): Sveriges Riksbank
• (wo): Stockholm
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/232599
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ