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ECB Monetary Policy Surprises: Identification Through Cojumps in Interest Rates
Author(s) -
Winkelmann Lars,
Bibinger Markus,
Linzert Tobias
Publication year - 2015
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2453
Subject(s) - surprise , monetary policy , predictability , yield curve , economics , futures contract , interest rate , monetary economics , identification (biology) , yield (engineering) , econometrics , futures market , short rate , financial economics , statistics , psychology , mathematics , social psychology , botany , materials science , metallurgy , biology
Summary This paper proposes a new econometric approach to disentangle two distinct response patterns of the yield curve to monetary policy announcements. Based on cojumps in intraday tick data of short‐ and long‐term interest rate futures, we develop a day‐wise test that detects the occurrence of a significant policy surprise and identifies the market perceived source of the surprise. The new test is applied to 133 policy announcements of the European Central Bank (ECB) in the period from 2001 to 2012. Our main findings indicate a good predictability of ECB policy decisions and remarkably stable perceptions about the ECB's policy preferences. Copyright © 2015 John Wiley & Sons, Ltd.