Portal de Periódicos da CAPES

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

2004; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.633281

1556-5068

Refet S. Gürkaynak, Brian Sack, Eric T. Swanson,

Market Dynamics and Volatility

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.