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Monetary policy and information production in the secondary market

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  • Adra, Samer
  • Menassa, Elie

Abstract

This paper studies the effect of Federal Reserve decisions on information production in the secondary market. We distinguish conventional monetary shocks from those conveying new economic information. Monetary contraction in the conventional sense leads information-driven traders to intensify their information production activity. In contrast, monetary contraction that conveys positive economic news reduces information production in the secondary market. In terms of influencing price informativeness, the Fed’s information shocks are more impactful than the conventional shocks.

Suggested Citation

  • Adra, Samer & Menassa, Elie, 2021. "Monetary policy and information production in the secondary market," Economics Letters, Elsevier, vol. 207(C).
    • Handle: RePEc:eee:ecolet:v:207:y:2021:i:c:s0165176521003219
    DOI: 10.1016/j.econlet.2021.110044
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    References listed on IDEAS

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    More about this item

    Keywords

    Federal Reserve; Informed trading; Monetary policy; Information shocks;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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

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