FRIC/FI Brown Bag Seminar with Gyuri Venter, Copenhagen Business School
The Department of Finance is pleased to announce the upcoming Brown Bag Seminar with Gyuri Venter, Copenhagen Business School.
Gyuri Venter will present
Central Bank Communication and the Yield Curve
The paper is joint work with Matteo Leombroni (Stanford), Andrea Vedolin (LSE) and Paul Whelan (CBS).
We extract novel measures of ECB target rate announcement and communications shocks using high frequency data on money market rates, and study their impact on yields of Eurozone countries. We document the following results: First, monetary policy shocks have little effect on bond yields during the target rate decision window, but both economically and statistically significant effect during the communication window; hence, forward guidance matters. Second, communication shocks mainly affect yields at intermediate maturities. Third, while the effect of monetary policy on bond yields pre-crisis is not statistically different across core and peripheral countries, we observe large cross-sectional differences since the financial crisis, with yields in peripheral countries being less affected than in core countries. Finally, monetary policy shocks significantly reduce the yield spread between peripheral and core countries. We rationalize these findings in a parsimonious international term structure model where interest rates are determined by the interaction between risk-averse arbitrageurs and reaching-for-yield investors.
Solbjerg Plads 3, 2000 Frederiksberg
Room: SP D4.20