Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/232599
Authors: 
Laséen, Stefan
Year of Publication: 
2020
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 396
Abstract: 
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.
Subjects: 
Monetary Policy
External Instruments
Monetary Policy Surprises
Information Effect
Small Open Economy
Exchange Rate
Stock Prices
House Prices
JEL: 
C32
C36
D83
E31
E43
E44
E52
E58
G14
Document Type: 
Working Paper

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