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Financial market reaction to Federal Reserve communications: Does the global financial crisis make a difference?

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  • Bernd Hayo
  • Ali Kutan
  • Matthias Neuenkirch

Abstract

This paper studies the effects of Federal Reserve communications on US financial market returns from 1998 to 2009 and asks whether they changed significantly during the global financial crisis of August 2007–July 2009. We find, first, that central bank communication moves financial markets in the intended direction. In particular, shorter maturities are affected in an economically meaningful way. Second, speeches by the chairman generate relatively larger market reactions than communication by other governors or presidents. Finally, central bank communication is even more market relevant during the subsample covering the global financial crisis. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Bernd Hayo & Ali Kutan & Matthias Neuenkirch, 2015. "Financial market reaction to Federal Reserve communications: Does the global financial crisis make a difference?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(1), pages 185-203, February.
    • Handle: RePEc:kap:empiri:v:42:y:2015:i:1:p:185-203
    DOI: 10.1007/s10663-014-9258-y
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    Cited by:

    1. Juan Camilo Anzoátegui Zapata & Juan Camilo Galvis, 2019. "Efectos de la comunicación del banco central sobre los títulos públicos: evidencia empírica para Colombia," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 38(77), pages 337-364, July.
    2. Juan Camilo Galvis Ciro & Juan Camilo Anzoátegui Zapata, 2018. "Announcements credibility and government securities: evidence from Colombia," Applied Economics Letters, Taylor & Francis Journals, vol. 25(4), pages 278-282, February.
    3. Margarita Irizepova, 2015. "Historical Evolution of Economic Category “State Financial Reservesâ€," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 103-114.
    4. Pavel Gertler & Roman Horváth & Júlia Jonášová, 2020. "Central Bank Communication and Financial Market Comovements in the Euro Area," Open Economies Review, Springer, vol. 31(2), pages 257-272, April.
    5. Ayadi, Mohamed A. & Ben Omrane, Walid & Das, Deepan Kumar, 2024. "Macroeconomic news, senior officials' speeches, and emerging currency markets: An intraday analysis of price jump reaction," Emerging Markets Review, Elsevier, vol. 60(C).
    6. Margarita Irizepova, 2015. "Methods of State’s Reaction to Risks of State Finances Management," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 129-136.
    7. Domenico Lombardi & Pierre L. Siklos & Samantha St. Amand, 2019. "Asset Price Spillovers from Unconventional Monetary Policy: A Global Empirical Perspective," International Journal of Central Banking, International Journal of Central Banking, vol. 15(2), pages 43-74, June.
    8. Juan Galvis & Claudio de Moraes & Juan Anzoátegui, 2017. "Effects of monetary policy announcements on exchange rate volatility: an analysis for Colombia, 2008-2015," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 87, pages 67-95, Julio - D.
    9. Carlo Rosa, 2016. "Fedspeak: Who Moves U.S. Asset Prices?," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 223-261, December.
    10. Jieun Lee & Doojin Ryu & Ali M. Kutan, 2016. "Monetary Policy Announcements, Communication, and Stock Market Liquidity," Australian Economic Papers, Wiley Blackwell, vol. 55(3), pages 227-250, September.
    11. Galvis Ciro, Juan Camilo & Oliveira de Moraes, Claudio & Anzoátegui Zapata, Juan Camilo, 2017. "Efectos de los anuncios de política monetaria sobre la volatilidad de la tasa de cambio: un análisis para Colombia, 2008-2015," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 87, pages 67-95, March.

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    More about this item

    Keywords

    Central bank communication; Federal Reserve; Global financial crisis; Financial markets; Monetary policy; E52; G14;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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