Information Effects of Euro Area Monetary Policy: New Evidence from High-Frequency Futures Data

Abstract

Central bank announcements move financial markets. The response of inflation and growth expectations, on the other hand, is often small or even counterintuitive. Based on tick-by-tick futures prices on bonds and stock prices, I confirm these seemingly puzzling results for the euro area and provide evidence that they are due to central bank effects. That is, ECB announcements convey not only about monetary policy, but also about economic fundamentals. I separate these information from pure policy via sign restrictions and find intuitive effects of both shocks on a wide set of financial market prices and survey measures of economic expectations.