Monetary policy uncertainty and the market reaction to macroeconomic news

Alexander Kurov, Raluca Stan

Research output: Contribution to journalArticlepeer-review

29 Scopus citations

Abstract

We examine whether monetary policy uncertainty influences the reaction of the equity, Treasury security, foreign exchange and crude oil markets, as well as medium-term interest rates, to U.S. macroeconomic announcements. Using intraday futures data, we show that in the presence of higher policy uncertainty the response to macroeconomic news weakens in the stock and crude oil markets and strengthens in the Treasury, interest rate and foreign exchange markets. In times of elevated monetary policy uncertainty, macroeconomic announcements impact the financial and crude oil markets to a large extent through expectations of future monetary policy.

Original languageEnglish (US)
Pages (from-to)127-142
Number of pages16
JournalJournal of Banking and Finance
Volume86
DOIs
StatePublished - Jan 2018
Externally publishedYes

Keywords

  • Financial markets
  • Intraday data
  • Macroeconomic announcements
  • Monetary policy

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