[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/snb/snbwpa/2022-08.html
   My bibliography  Save this paper

Responses of Swiss bond yields and stock prices to ECB policy surprises

Author

Listed:
  • Dr. Thomas Nitschka
  • Diego M. Hager
Abstract
We analyse spillovers from European Central Bank (ECB) policy surprises to asset markets outside the euro area using Switzerland as a case study. Our results suggest that Swiss asset price responses to ECB policy surprises are significant. They depend on the type and nature of the surprise and change over time. Decomposing bond yields into expected short-term interest rates and the term premium reveals that both signalling and portfolio rebalancing effects explain the responses of bond yields of various maturities to surprises resulting from scheduled ECB policy decisions. ECB policy surprises are more important to Swiss government bond yields than Swiss stock prices.

Suggested Citation

  • Dr. Thomas Nitschka & Diego M. Hager, 2022. "Responses of Swiss bond yields and stock prices to ECB policy surprises," Working Papers 2022-08, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2022-08
    as

    Download full text from publisher

    File URL: https://www.snb.ch/en/publications/research/working-papers/2022/working_paper_2022_08
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
    2. Glick, Reuven & Leduc, Sylvain, 2012. "Central bank announcements of asset purchases and the impact on global financial and commodity markets," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2078-2101.
    3. Altavilla, Carlo & Brugnolini, Luca & Gürkaynak, Refet S. & Motto, Roberto & Ragusa, Giuseppe, 2019. "Measuring euro area monetary policy," Journal of Monetary Economics, Elsevier, vol. 108(C), pages 162-179.
    4. Christensen, Jens H.E. & Diebold, Francis X. & Rudebusch, Glenn D., 2011. "The affine arbitrage-free class of Nelson-Siegel term structure models," Journal of Econometrics, Elsevier, vol. 164(1), pages 4-20, September.
    5. Thorbecke, Willem, 1997. "On Stock Market Returns and Monetary Policy," Journal of Finance, American Finance Association, vol. 52(2), pages 635-654, June.
    6. Michael Ehrmann & Marcel Fratzscher, 2009. "Global Financial Transmission of Monetary Policy Shocks," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(6), pages 739-759, December.
    7. Bernhard, Severin & Ebner, Till, 2017. "Cross-border spillover effects of unconventional monetary policies on Swiss asset prices," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 109-127.
    8. Francesca Brusa & Pavel Savor & Mungo Wilson, 2020. "One Central Bank to Rule Them All," Review of Finance, European Finance Association, vol. 24(2), pages 263-304.
    9. Jeffrey R. Campbell & Charles L. Evans & Jonas D.M. Fisher & Alejandro Justiniano, 2012. "Macroeconomic Effects of Federal Reserve Forward Guidance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(1 (Spring), pages 1-80.
    10. Emi Nakamura & Jón Steinsson, 2018. "High-Frequency Identification of Monetary Non-Neutrality: The Information Effect," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1283-1330.
    11. ter Ellen, Saskia & Jansen, Edvard & Midthjell, Nina Larsson, 2020. "ECB Spillovers and domestic monetary policy effectiveness in small open economies," European Economic Review, Elsevier, vol. 121(C).
    12. Marek Jarociński & Peter Karadi, 2020. "Deconstructing Monetary Policy Surprises—The Role of Information Shocks," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(2), pages 1-43, April.
    13. Jordan, Thomas J., 2016. "The impact of international spillovers on Swiss inflation and the exchange rate," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 262-265.
    14. Adrian, Tobias & Crump, Richard K. & Moench, Emanuel, 2013. "Pricing the term structure with linear regressions," Journal of Financial Economics, Elsevier, vol. 110(1), pages 110-138.
    15. Wongswan, Jon, 2009. "The response of global equity indexes to U.S. monetary policy announcements," Journal of International Money and Finance, Elsevier, vol. 28(2), pages 344-365, March.
    16. Jiang, Zhengyang & Krishnamurthy, Arvind & Lustig, Hanno, 2018. "Dollar Safety and the Global Financial Cycle," Research Papers 3747, Stanford University, Graduate School of Business.
    17. Refet S Gürkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
    18. John Ammer & Clara Vega & Jon Wongswan, 2010. "International Transmission of U.S. Monetary Policy Shocks: Evidence from Stock Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 179-198, September.
    19. Potjagailo, Galina, 2017. "Spillover effects from Euro area monetary policy across Europe: A factor-augmented VAR approach," Journal of International Money and Finance, Elsevier, vol. 72(C), pages 127-147.
    20. Swanson, Eric T., 2021. "Measuring the effects of federal reserve forward guidance and asset purchases on financial markets," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 32-53.
    21. Aït-Sahalia, Yacine & Andritzky, Jochen & Jobst, Andreas & Nowak, Sylwia & Tamirisa, Natalia, 2012. "Market response to policy initiatives during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 162-177.
    22. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
    23. John Ammer & Clara Vega & Jon Wongswan, 2010. "International Transmission of U.S. Monetary Policy Shocks: Evidence from Stock Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 179-198, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hager, Diego & Nitschka, Thomas, 2022. "The Impact of COVID-19 and other Crises on the Responses of Swiss Bond Yields and Stock Prices to ECB Policy Surprises," VfS Annual Conference 2022 (Basel): Big Data in Economics 264018, Verein für Socialpolitik / German Economic Association.
    2. Maurer, Tim D. & Nitschka, Thomas, 2023. "Stock market evidence on the international transmission channels of US monetary policy surprises," Journal of International Money and Finance, Elsevier, vol. 136(C).
    3. Bekaert, Geert & Hoerova, Marie & Xu, Nancy, 2023. "Risk, Monetary Policy and Asset Prices in a Global World," CEPR Discussion Papers 18229, C.E.P.R. Discussion Papers.
    4. Richhild Moessner, 2015. "International spillovers from US forward guidance to equity markets," Applied Economics, Taylor & Francis Journals, vol. 47(42), pages 4549-4560, September.
    5. van der Zwan, Terri & Kole, Erik & van der Wel, Michel, 2024. "Heterogeneous macro and financial effects of ECB asset purchase programs," Journal of International Money and Finance, Elsevier, vol. 143(C).
    6. Jonathan Kearns & Andreas Schrimpf & Fan Dora Xia, 2023. "Explaining Monetary Spillovers: The Matrix Reloaded," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(6), pages 1535-1568, September.
    7. Jarociński, Marek, 2022. "Central bank information effects and transatlantic spillovers," Journal of International Economics, Elsevier, vol. 139(C).
    8. Kaminska, Iryna & Mumtaz, Haroon & Šustek, Roman, 2021. "Monetary policy surprises and their transmission through term premia and expected interest rates," Journal of Monetary Economics, Elsevier, vol. 124(C), pages 48-65.
    9. Kortela, Tomi & Nelimarkka, Jaakko, 2020. "The effects of conventional and unconventional monetary policy: Identification through the yield curve," Bank of Finland Research Discussion Papers 3/2020, Bank of Finland.
    10. Hauzenberger, Niko & Pfarrhofer, Michael & Stelzer, Anna, 2021. "On the effectiveness of the European Central Bank’s conventional and unconventional policies under uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 822-845.
    11. Kortela, Tomi & Nelimarkka, Jaakko, 2020. "The effects of conventional and unconventional monetary policy : identification through the yield curve," Research Discussion Papers 3/2020, Bank of Finland.
    12. Möller, Rouven & Reichmann, Doron, 2021. "ECB language and stock returns – A textual analysis of ECB press conferences," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 590-604.
    13. Kerssenfischer, Mark, 2019. "Information Effects of Euro Area Monetary Policy: New evidence from high-frequency futures data," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203524, Verein für Socialpolitik / German Economic Association.
    14. repec:zbw:bofrdp:2020_003 is not listed on IDEAS
    15. Julian Di Giovanni & Galina Hale, 2022. "Stock Market Spillovers via the Global Production Network: Transmission of U.S. Monetary Policy," Journal of Finance, American Finance Association, vol. 77(6), pages 3373-3421, December.
    16. Jung, Alexander, 2023. "US monetary policy spillovers to European banks," Working Paper Series 2876, European Central Bank.
    17. Boeck, Maximilian & Feldkircher, Martin, 2021. "The Impact of Monetary Policy on Yield Curve Expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 887-901.
    18. Niko Hauzenberger & Michael Pfarrhofer, 2021. "Bayesian State‐Space Modeling for Analyzing Heterogeneous Network Effects of US Monetary Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(4), pages 1261-1291, October.
    19. Chen, Zhengyang, 2019. "The Long-term Rate and Interest Rate Volatility in Monetary Policy Transmission," EconStor Preprints 204579, ZBW - Leibniz Information Centre for Economics.
    20. Andrade, Philippe & Ferroni, Filippo, 2021. "Delphic and odyssean monetary policy shocks: Evidence from the euro area," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 816-832.
    21. Kerssenfischer, Mark & Schmeling, Maik, 2024. "What moves markets?," Journal of Monetary Economics, Elsevier, vol. 145(C).

    More about this item

    Keywords

    Bond; event study; international spillovers; monetary policy; stock;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:snb:snbwpa:2022-08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Enzo Rossi (email available below). General contact details of provider: https://edirc.repec.org/data/snbgvch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.