The long-run information effect of central bank communication

Hansen, Stephen; McMahon, Michael; Tong, Matthew

doi:10.1016/j.jmoneco.2019.09.002

Cited by 90 publications

(69 citation statements)

References 50 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…8 Recent work by Hansen, McMahon and Tong (2019) shows that changes in the narrative information from the Bank of England's Inflation Report, which likely captures inflation risk premia as opposed to forward guidance (which is the focus of our paper), also help explain movements in term premia in longer-term bonds.…”

Section: Alternative Uncertainty Measuresmentioning

confidence: 97%

Forward Guidance, Monetary Policy Uncertainty, and the Term Premium

Bundick¹,

Herriford²,

Smith³

2017

RWP

View full text Add to dashboard Cite

When the Federal Reserve provides greater clarity about the path of future interest rates, term premia in longer-term bonds fall and economic activity increases. This interest rate uncertainty channel of forward guidance sheds light on three important issues in macroeconomics. First, this channel explains how forward guidance shapes term premia, both away from and at the zero lower bound. Second, our mechanism offers a novel explanation for the puzzling fact that monetary policy announcements affect distant real forward rates. Finally, we show that event studies overstate the effects of large-scale asset purchases when they fail to control for simultaneous forward guidance.

show abstract

Section: Alternative Uncertainty Measuresmentioning

confidence: 97%

Forward Guidance, Monetary Policy Uncertainty, and the Term Premium

Bundick¹,

Herriford²,

Smith³

2017

RWP

View full text Add to dashboard Cite

show abstract

“…Regarding some empirical evidence about the impact of central bank communication, previous literature has found evidence that, first, it has an effect not only on short-term market interest rates but also on the long-term ones and, second, the importance of the different channels that explain such an effect varies according to maturity (e.g. Gürkaynak et al, 2005;Cieslak and Schrimpf, 2019;Hansen et al, 2019a).…”

Section: Introductionmentioning

confidence: 99%

Effects of Banco de la Republica’s Communication on the Yield Curve

Melo‐Velandia¹,

Ospina-Tejeiro²,

Parra-Polanía³

2020

View full text Add to dashboard Cite

We analyze the effect on the yield curve of Banco de la Republica's communication through two specific outlets, the minutes of the monetary policy meetings and the inflation reports during the period 2011-Q2 to 2018-Q4. We extract numeric information from the inflation reports' fan charts, and narrative information-using Latent Dirichlet Allocation, a computational linguistics tool-from the text of both outlets. We use an event-study approach to analyze the impact on four specific maturities: one-year spot, three-year forward, five-year forward and five-year ahead five-year forward rates. We find no evidence that numeric information has any effect on market yields. Regarding narrative variables we find that (i) for the inflation report, there is a significant effect on just two yields (one-year spot and five-year forward), and (ii) for the minute, there is a significant effect on all yields. We believe that these results may be explained by the publication lag of the inflation report during the period of analysis.

show abstract

“…carried out similar analysis for the Bank of England Inflation Report. More recently,Hansen, McMahon, and Tong (2018) show that central bank communication on risks and uncertainty are an important source of information for long-maturity yields. See alsoTobback, Nardelli, and Martens (2017). ©International Monetary Fund.…”

mentioning

confidence: 99%