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Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements
Open accessAbstract
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.
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Metadata
- Authors
- Gürkaynak, R. S., Sack, B., & Swanson, E. T.
- Venue
- Finance and Economics Discussion Series
- Published
- 2004
- Volume
- 2004.0
- Issue
- 66
- Pages
- 1-43
- ISSN
- 1936-2854 (ISSN-L)
- OpenAlex
- W2114597179
- Cited by
- 1,560
- References
- 0
- FWCI
- 45.56
- Type
- journal article
- Language
- en
- Open access
- hybrid
- Licence
- www.usa.gov/publicdomain/label/1.0/ (tdm)
- www.usa.gov/publicdomain/label/1.0/ (vor)
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- Gürkaynak, R. S., Sack, B., & Swanson, E. T. (2004). Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements. Finance and Economics Discussion Series. https://doi.org/10.17016/feds.2004.66
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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