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Measuring Riksbank Monetary Policy: Shocks and Macroeconomic Transmission

Author

Listed:
  • Almerud, Jakob

    (Monetary Policy Department, Central Bank of Sweden)

  • Krygier, Dominika

    (Monetary Policy Department, Central Bank of Sweden)

  • Lundvall , Henrik

    (Monetary Policy Department, Central Bank of Sweden)

  • Njie, Mambuna

    (Monetary Policy Department, Central Bank of Sweden)

Abstract

We construct and make available a new monetary policy event study database with high-frequency financial market reactions to Riksbank communications, spanning a period of 20 years. Using these data as instruments, we estimate the macroeconomic effects of monetary policy shocks in Sweden. A temporary, unexpected policy rate tightening induces an immediate and persistent appreciation of the krona exchange rate, as well as a gradual, negative response in output and consumer prices. These results are statistically significant, economically meaningful and robust to a number of variations in our econometric specification. In particular, we consider the possibility that financial market reactions to Riksbank communications may consist not only of pure monetary policy shocks, but could also reflect market participants’ updates concerning the central bank’s reaction function.

Suggested Citation

  • Almerud, Jakob & Krygier, Dominika & Lundvall , Henrik & Njie, Mambuna, 2024. "Measuring Riksbank Monetary Policy: Shocks and Macroeconomic Transmission," Working Paper Series 445, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0445
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    File URL: https://www.riksbank.se/globalassets/media/rapporter/working-papers/2024/no.-445-measuring-riksbank-monetary-policy-shocks-and-macroeconomic-transmission.pdf
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    More about this item

    Keywords

    monetary policy surprise database; monetary policy shocks; intraday; event study; proxy VAR; macroeconomic effects;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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