News and Monetary Shocks at a High Frequency: A Simple Approach

IMF Working Papers, September 12, 2014

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News and Monetary Shocks at a High Frequency: A Simple Approach

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Bibliographic details

• Authors: Troy D Matheson, Emil Stavrev
• Published: September 12, 2014
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781498324854.001

Summary

• We develop a simple approach to identify economic news and monetary shocks at a high frequency.
• The approach is used to examine financial market developments in the United States following the Federal Reserve’s May 22, 2013 taper talk suggesting that it would begin winding down its quantitative easing program.
• Findings show that the sharp rise in 10-year Treasury bond yields immediately after the taper talk was largely due to monetary shocks, with positive economic news becoming increasingly important in subsequent months.

Approach and Scope

• Objective: Identify economic news and monetary shocks at a high frequency.
• Application: Financial market developments in the United States around the Federal Reserve’s May 22, 2013 taper talk.
• Key focus areas listed under Subject and Keywords:
  • Subject: Asset prices, Bond yields, Financial institutions, Prices, Stocks
  • Keywords: Asset prices, bond yield, Bond yields, Economic News, equity price, Fed portfolio, market volatility, Monetary Policy, reaction function, Stocks, variance of bond yields, WP

Major Findings

• The sharp rise in 10-year Treasury bond yields immediately after the May 22, 2013 taper talk was largely due to monetary shocks.
• Positive economic news became increasingly important in influencing yields in subsequent months.

Notes

• Disclaimer from the source: "This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate."

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