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Journal Article
What are the odds? option-based forecasts of FOMC target changes
Lakdawala, Aeimit K.; Neely, Christopher J.; Emmons, William R. (2006-11)
This article uses probability forecasts derived from options to assess evolving market uncertainty about Federal Reserve monetary policy actions in a variety of recent events and episodes. Options on federal funds futures contracts reveal a complete probability density function over possible Federal Reserve target rates, thus augmenting the expectations provided by federal funds futures contracts. Option-based forecasts are most useful when more than two federal funds target outcomes are plausible at an upcoming policy meeting.
Review , Volume 88 , Issue Nov , Pages 543-562

Journal Article
Global factors in budget deficits
Neely, Christopher J. (2003-11)
International Economic Trends , Issue Nov

Working Paper
Central bank intervention and exchange rate volatility, its continuous and jump components
Lahaye, Jerome; Laurent, Sebastien; Palm, Franz C.; Neely, Christopher J.; Beine, Michel (2007)
We analyze the relationship between interventions and volatility at daily and intra-daily frequencies for the two major exchange rate markets. Using recent econometric methods to estimate realized volatility, we employ bipower variation to decompose this volatility into a continuously varying and jump component. Analysis of the timing and direction of jumps and interventions imply that coordinated interventions tend to cause few, but large jumps. Most coordinated operations explain, statistically, an increase in the persistent (continuous) part of exchange rate volatility. This correlation is ...
Working Papers , Paper 2006-031

Journal Article
September 11, 2001
Neely, Christopher J. (2001-11)
Monetary Trends , Issue Nov

Working Paper
Capital flows and Japanese asset volatility
Fawley, Brett W.; Neely, Christopher J. (2011)
Characterizing asset price volatility is an important goal for financial economists. The literature has shown that variables that proxy for the information arrival process can help explain and/or forecast volatility. Unfortunately, however, obtaining good measures of volume and/or order flow is expensive or difficult in decentralized markets such as foreign exchange. We investigate the extent that Japanese capital flows?which are released weekly?reflect information arrival that improves foreign exchange and equity volatility forecasts. We find that capital flows can help explain transitory ...
Working Papers , Paper 2011-034

Working Paper
An Analysis of the Literature on International Unconventional Monetary Policy
Bhattarai, Saroj; Neely, Christopher J. (2020-05-04)
This paper evaluates the literature on international unconventional monetary policies (UMP). Introducing market segmentation, limits-to-arbitrage, and time-consistent policy in standard models permits a theoretical role for UMP. Empirical studies provide compelling evidence that UMP influenced international asset prices and tail-risk in the desired manner. Calibrated modeling and vector autoregressive (VAR) exercises imply that these policies also improved macroeconomic outcomes. We assess the recent debate on the empirical evidence and discuss central bank assessments of UMP. Despite ...
Working Papers , Paper 2016-021

Working Paper
The response of multinationals’ foreign exchange rate exposure to macroeconomic news
Neely, Christopher J.; Wauters, Marjan; Boudt, Kris; Sercu, Piet (2017-07-31)
We use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms? foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure.
Working Papers , Paper 2017-20

Working Paper
More Stories of Unconventional Monetary Policy
Karson, Evan; Neely, Christopher J. (2020-10-29)
This article extends the work of Fawley and Neely (2013) to describe how major central banks have evolved unconventional monetary policies to encourage real activity and maintain stable inflation rates from 2013 through 2019. By 2013, central banks were moving from lump-sum asset purchase programs to continuing asset purchase programs, which are conditioned on economic conditions, careful communication strategies, bank lending programs with incentives and negative interest rates. This article reviews how central banks tailored their unconventional monetary methods to their various challenges ...
Working Papers , Paper 2020-043

Working Paper
Central bank intervention with limited arbitrage
Weller, Paul A.; Neely, Christopher J. (2007)
Shleifer and Vishny (1997) pointed out some of the practical and theoretical problems associated with assuming that rational risk-arbitrage would quickly drive asset prices back to long-run equilibrium. In particular, they showed that the possibility that asset price disequilibrium would worsen, before being corrected, tends to limit rational speculators. Uniquely, Shleifer and Vishny (1997) showed that ?performance-based asset management? would tend to reduce risk-arbitrage when it is needed most, when asset prices are furthest from equilibrium. We analyze a generalized Shleifer and Vishny ...
Working Papers , Paper 2006-033

Working Paper
Systematic Cojumps, Market Component Portfolios and Scheduled Macroeconomic Announcements
Chan, Kam Fong; Bowman, Robert G.; Neely, Christopher J. (2017-04-26)
This study provides evidence of common bivariate jumps (i.e., systematic cojumps) between the market index and style-sorted portfolios. Systematic cojumps are prevalent in book-to-market portfolios and hence, their risk cannot easily be diversified away by investing in growth or value stocks. Nonetheless, large-cap firms have less exposure to systematic cojumps than small-cap firms. Probit regression reveals that systematic cojump occurrences are significantly associated with worse-than-expected scheduled macroeconomic announcements, especially those pertaining to the Federal Funds target ...
Working Papers , Paper 2017-11

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