A0161
Title: Monetary policy spillovers: A global empirical perspective
Authors: Pierre Siklos - Wilfrid Laurier University (Canada) [presenting]
Domenico Lombardi - Centre for International Governance Innovation (Canada)
Samantha St Amand - Centre for International Governance Innovation (Canada)
Abstract: New light is shed on the spillovers from US unconventional monetary policies by examining the behavior of select financial asset prices at the daily frequency and by incorporating a crucial element in the conduct of monetary policy, namely the tone of verbal announcements by central banks. We eschew the event study approach and adopt a time series perspective. Monetary policy surprise easings are found to decrease yields in most economies since October 2008. The size of the response varies considerably across the economies examined, but for 10-year government bonds, they range from a 15 to 30 basis points reduction in yields in the United States, the United Kingdom and the Euro zone. The impact was found to be larger on long-term sovereign bonds than on shorter-term assets, and stronger in major economies, such as the United Kingdom and the Euro zone, and in Canada. The analysis also provides evidence that the tone of US Fed communication and a countrys own central bank policy statements, constructed using text analysis software, have a significant impact on asset prices. The impact of the tone of these statements has been notably stronger since the start of the crisis, with financial market reactions appearing to be relatively more sensitive to the content of statements during the post-crisis period.
