Asset prices and expected monetary policy: evidence from daily data

Abstract

This article explores the relationships among Libor, gold prices, the exchange rate, oil prices, fed funds futures prices and stock prices at a daily frequency. This article examines whether expected monetary policy, measured by changes in the prices of fed funds futures contracts, reacts to high frequency changes in asset prices and, in turn, whether asset prices respond to changes in expected monetary policy. The article reveals that there are statistically significant relationships between expected US monetary policy and shocks to Libor and exchange rates. It also reveals that there is no evidence of a systematic relationship between stock prices and expected monetary policy changes. Splitting the data into expansionary and recessionary periods using NBER dating, we find results for the expansionary periods that are very similar to the results for the entire period. For the periods of recession, we find little evidence of significant linkages between markets.

Reference Rates and Monetary Policy Effectiveness in Korea

“…They also play important roles in effective monetary policy, as media linking the policy rate to the financial markets and real economy. The existing literature has studied this medium role in terms of the relationships between the reference rates and the policy rate (Kobayashi, 2009;Carpenter and Demiralp, 2011;Ivrendi and Pearce, 2014), and between the reference rates and macroeconomic stability (Sudo, 2012;Muto, 2013;Kawasaki et al, 2012).…”

“…Comparative Evaluation of Loan Reference RatesExisting studies examine the relationships of the reference rates with monetary policy in terms of i) the relationships between the reference rates and the monetary policy instruments, and ii) the roles of the reference rates for macroeconomic stabilization. Concerning the first issue,Ivrendi and Pearce (2014) use VAR to determine the relationships between expected monetary policy and LIBOR. Carpenter and Demiralp (2011) use single linear regression models to find evidence of the expectations hypothesis in the relationship between 3-month LIBOR and an appropriate measure of the expected federal funds rate.…”

The Influence of Consumption and Investment on Unemployment in Turkey: a SVAR Approach

“…When the general implementation of literature is considered, the most exogenous variable is placed on the top of the ordering, assuming it will not be contemporaneously affected by succeeding variables. According to the below given ordering scheme, each variable in the parentheses is not contemporaneously affected by the subsequent shocks that follow it, while it is contemporaneously affected by the shocks from the preceding variables (İvrendi and Pearce, 2014). In all the SVAR models that have been employed in this paper, consumption is not contemporaneously affected by any other variables in the SVAR model as it is placed on the top of the ordering.…”