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Federal Reserve Bank of St. Louis
Gauging Market Responses to Monetary Policy Communication
The modern model of central bank communication suggests that central bankers prefer to err on the side of saying too much rather than too little. The reason is that most central bankers believe that clear and concise communication of monetary policy helps achieve their goals. For the Federal Reserve, this means to achieve its goals of price stability, maximum employment, and stable long-term interest rates. This article examines the various dimensions of Fed communication with the public and financial markets and how Fed communication with the public has evolved over time. We use daily and intraday data to document how Fed communication affects key financial market variables. We find that Fed communication is associated with changes in prices of financial market instruments such as Treasury securities and equity prices. However, this effect varies by type of communication, by type of instrument, and by who is doing the speaking.
Cite this item
Kevin L. Kliesen & Brian Levine & Christopher J. Waller, "Gauging Market Responses to Monetary Policy Communication"
, Federal Reserve Bank of St. Louis, Review, volume 101, issue 2, pages 69-91, 2019.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This item with handle RePEc:fip:fedlrv:00115
is also listed on EconPapers
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