Which News Moves the Euro Area Bond Market?

This paper explores a long dataset (1999-2005) of intraday prices on German long-term bond futures and examines market responses to major macroeconomic announcements and ECB monetary policy releases. German bond markets tend to react more strongly to the surprise component in US macro releases compared with aggregated and national euro area and UK releases, and the strength of those reactions to US releases has increased over the period considered. We also document that the numbers of German unemployed workers consistently have been known to investors before official releases. Copyright 2009 The Authors. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2009.

Københavns Universitet Has the Fed Reacted Asymmetrically to Stock Prices? Has the Fed Reacted Asymmetrically to Stock Prices?

Abstract This paper presents an empirical study of a potential asymmetry in the response of monetary policy to stock prices in the US. The main …nding is that while monetary policy reacts signi…cantly to stock price drops, no signi…cant reaction to stock price increases is found. This result is obtained by applying the method of identi…cation through heteroskedasticity to a daily dataset covering the period 1998-2008. The result is con…rmed in an estimated, augmented Taylor rule based on monthly data for the same period. The size of the estimated, asymmetric reaction is modest. The study constitutes an empirical contribution to the debate about the role of asset prices in monetary policy, which has seen a revival in the aftermath of the crisis. In particular, the results lend empirical support to recent claims that the pre-crisis approach to monetary policy implied an asymmetric policy stance towards stock price movements