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The impact of news on monetary policy expectations

  • Author(s): Bauer, Michael Dominic
  • et al.
Abstract

Expectations of future monetary policy are a crucial determinant of asset prices. This dissertation provides answers to the question how newly available information, such as news about the future stance of monetary policy or about the macroeconomic situation, affects these expectations. The first chapter characterizes how interest rates react to monetary policy actions and macroeconomic news. The second chapter decomposes interest rate changes into revisions of monetary policy expectations and changes in term premia, with the result that most high-frequency variation in interest rates is accounted for by expectations of future monetary policy. The third chapter targets the question what drives the revisions of nominal short rate expectations and documents an important role for inflation expectations

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