Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200582
Authors: 
Andrade, Philippe
Ferroni, Filippo
Year of Publication: 
2018
Series/Report no.: 
Working Paper 2018-12
Abstract: 
We use financial intraday data to identify monetary policy surprises in the euro area. We find that monetary policy statements and press conferences after European Central Bank (ECB) Governing Council meetings convey information that moves the yield curve far out. Moreover, the nature of the information revealed in a narrow window around these statements and press conferences evolved over time. Until 2013, unexpected variations in future interest rates were positively correlated with the changes in market-based measure of inflation expectations consistent with news on future macroeconomic conditions. That negative correlation disappeared roughly when forward guidance on future rates started to be given by the Governing Council. We use conditions on the joint reaction of expected interest rates and inflation rates to disentangle the two types of monetary policy shocks (i.e. the Delphic and Odyssean monetary policy surprise). A surprise that lowers future interest rates does not engineer a boom. A surprise that lowers future interest rates because it signals future accommodation does.
Subjects: 
signaling
forward guidance
high frequency data
VAR with instrumented proxy
euro area
JEL: 
C10
E52
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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