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FUTURES-BASED MEASURES OF MONETARY POLICY AND JUMP RISK

Published online by Cambridge University Press:  23 May 2016

Inekwe John Nkwoma
Inekwe John Nkwoma*
Affiliation:
Monash University
*
Address correspondence to: Inekwe John Nkwoma, Department of Economics, Monash University, Caulfield, Victoria 3145, Australia; e-mail: [email protected], [email protected].
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Abstract

We estimate the effects of anticipated and unanticipated monetary policy changes on jump variation by employing high-frequency nonparametric jump detection methods. We find that anticipated changes in the Fed funds have no significant effect on jumps. In contrast, jump variation in the price of financial market data increases with monetary policy surprises. We document evidence of asymmetries in the response of jumps to monetary policy changes. Monetary policy surprises and positive changes in the Fed target rate induce increments in jumps. Similar results exist in the sector analysis. In addition, this study uncovers no evidence of endogenous response between jumps and monetary policy surprises.

Keywords

Stock MarketAnticipatedUnanticipatedMonetary PolicyJumps
Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 2 , March 2017 , pp. 384 - 405
Copyright
Copyright © Cambridge University Press 2016 

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