IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v242y2024ics0165176524003574.html
   My bibliography  Save this article

Constructing high-frequency monetary policy surprises from SOFR futures

Author

Listed:
  • Acosta, Miguel
  • Brennan, Connor M.
  • Jacobson, Margaret M.

Abstract

Eurodollar futures were the bedrock for constructing high-frequency series of monetary policy surprises, so their discontinuation poses a challenge for the continued empirical study of monetary policy. We propose an approach for updating the series of Gürkaynak, Sack, and Swanson (2005) and Nakamura and Steinsson (2018) with SOFR futures in place of Eurodollar futures that is conceptually and materially consistent. We recommend using SOFR futures from January 2022 onward based on regulatory developments and trading volumes. The updated series suggest that surprises over the recent tightening cycle are larger in magnitude than those seen over the decade prior and restrictive on average.

Suggested Citation

  • Acosta, Miguel & Brennan, Connor M. & Jacobson, Margaret M., 2024. "Constructing high-frequency monetary policy surprises from SOFR futures," Economics Letters, Elsevier, vol. 242(C).
    • Handle: RePEc:eee:ecolet:v:242:y:2024:i:c:s0165176524003574
    DOI: 10.1016/j.econlet.2024.111873
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176524003574
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2024.111873?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Erik Heitfield & Yang-Ho Park, 2019. "Inferring Term Rates from SOFR Futures Prices," Finance and Economics Discussion Series 2019-014, Board of Governors of the Federal Reserve System (U.S.).
    2. Emi Nakamura & Jón Steinsson, 2018. "High-Frequency Identification of Monetary Non-Neutrality: The Information Effect," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1283-1330.
    3. Connor M. Brennan & Margaret M. Jacobson & Christian Matthes & Todd B. Walker, 2024. "Monetary Policy Shocks: Data or Methods?," Finance and Economics Discussion Series 2024-011, Board of Governors of the Federal Reserve System (U.S.).
    4. Refet S Gürkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. NAKAJIMA, Jouchi, 2025. "Impact of US Monetary Policy Spillovers and Yield Curve Control Policy," Discussion Paper Series 760, Institute of Economic Research, Hitotsubashi University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tadle, Raul Cruz, 2022. "FOMC minutes sentiments and their impact on financial markets," Journal of Economics and Business, Elsevier, vol. 118(C).
    2. Swanson, Eric T., 2021. "Measuring the effects of federal reserve forward guidance and asset purchases on financial markets," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 32-53.
    3. repec:hal:spmain:info:hdl:2441/74362fq3f99s299n07e84dlcib is not listed on IDEAS
    4. Bu, Chunya & Rogers, John & Wu, Wenbin, 2021. "A unified measure of Fed monetary policy shocks," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 331-349.
    5. repec:hal:spmain:info:hdl:2441/3mgbd73vkp9f9oje7utooe7vpg is not listed on IDEAS
    6. Döttling, Robin & Lam, Adrian, 2023. "Does Monetary Policy Shape the Path to Carbon Neutrality?," OSF Preprints kqdar, Center for Open Science.
    7. Jeffrey R. Campbell & Thomas B. King & Anna Orlik & Rebecca Zarutskie, 2020. "Issues Regarding the Use of the Policy Rate Tool," Finance and Economics Discussion Series 2020-070, Board of Governors of the Federal Reserve System (U.S.).
    8. van der Zwan, Terri & Kole, Erik & van der Wel, Michel, 2024. "Heterogeneous macro and financial effects of ECB asset purchase programs," Journal of International Money and Finance, Elsevier, vol. 143(C).
    9. Inoue, Atsushi & Rossi, Barbara, 2019. "The effects of conventional and unconventional monetary policy on exchange rates," Journal of International Economics, Elsevier, vol. 118(C), pages 419-447.
    10. Paul Hubert & Fabien Labondance, 2016. "Central Bank Sentiment and Policy Expectations," SciencePo Working papers Main hal-03459227, HAL.
    11. Odendahl, Florens & Pagliari, Maria Sole & Penalver, Adrian & Rossi, Barbara & Sestieri, Giulia, 2024. "Euro area monetary policy effects. Does the shape of the yield curve matter?," Journal of Monetary Economics, Elsevier, vol. 147(S).
    12. Jonathan Kearns & Andreas Schrimpf & Fan Dora Xia, 2023. "Explaining Monetary Spillovers: The Matrix Reloaded," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(6), pages 1535-1568, September.
    13. Max Breitenlechner & Martin Geiger & Mathias Klein, 2024. "The Fiscal Channel of Monetary Policy," Working Papers 2024-07, Faculty of Economics and Statistics, Universität Innsbruck.
    14. Gürkaynak, Refet S. & Kara, A. Hakan & Kısacıkoğlu, Burçin & Lee, Sang Seok, 2021. "Monetary policy surprises and exchange rate behavior," Journal of International Economics, Elsevier, vol. 130(C).
    15. Das, Sonali & Song, Wenting, 2023. "Monetary policy transmission and policy coordination in China," China Economic Review, Elsevier, vol. 82(C).
    16. Bauer, Michael D. & Offner, Eric A. & Rudebusch, Glenn D., 2024. "Green stocks and monetary policy shocks: Evidence from Europe," IMFS Working Paper Series 215, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    17. Andreas Neuhierl & Michael Weber & Michael Weber, 2017. "Monetary Momentum," CESifo Working Paper Series 6648, CESifo.
    18. Thomas Nitschka & Diego M. Hager, 2022. "Responses of Swiss bond yields and stock prices to ECB policy surprises," Working Papers 2022-08, Swiss National Bank.
    19. Jean-Alexandre Vaglio & Dorian Henricot & Juraj Falath & Marc de la Barrera, 2017. "The Impact of Forward Guidance on Inflation Expectations: Evidence from the ECB," Working Papers 1010, Barcelona School of Economics.
    20. Hansen, Stephen & McMahon, Michael & Tong, Matthew, 2019. "The long-run information effect of central bank communication," Journal of Monetary Economics, Elsevier, vol. 108(C), pages 185-202.
    21. Jannik Hensel & Giacomo Mangiante & Luca Moretti, 2023. "Carbon Pricing and Inflation Expectations: Evidence from France," CESifo Working Paper Series 10552, CESifo.
    22. Giancarlo Corsetti & Joao B Duarte & Samuel Mann, 2022. "One Money, Many Markets [Fixed Rate Versus Adjustable Rate Mortgages: Evidence from Euro Area Banks]," Journal of the European Economic Association, European Economic Association, vol. 20(1), pages 513-548.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:242:y:2024:i:c:s0165176524003574. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.