The discrete and differential impact of monetary policy

This study exploits a unique feature of the Australian monetary policy environment to determine whether economic recovery can be stimulated via central bank communications. This study finds that unexpected monetary policy announcements and communications have a significant and comparable impact on t...

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Bibliographic Details
Published in:Accounting and finance (Parkville) 2020-09, Vol.60 (3), p.2919-2937
Main Author: McCredie, Bronwyn
Format: Article
Language:English
Subjects:
Analysis
Central banks
Economic recovery
Explanatory minutes
Financial markets
Foreign exchange
Foreign exchange markets
Global financial crisis
Monetary policy
Sentiment
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Summary:This study exploits a unique feature of the Australian monetary policy environment to determine whether economic recovery can be stimulated via central bank communications. This study finds that unexpected monetary policy announcements and communications have a significant and comparable impact on the value and volatility of the Australian foreign exchange market, suggesting that they can be used interchangeably to stimulate economic recovery. However, further analysis reveals that the state of the economy influences this impact. Specifically, during poor economic states, monetary policy actions speak louder than words, an adage that in this context provides actionable information for central bank regulators.
ISSN:0810-5391
1467-629X
DOI:10.1111/acfi.12421