Beruflich Dokumente
Kultur Dokumente
8 JULY 2017
DALLASFED
Economic
Letter
Impact of Macroeconomic Surprises
Changed After Zero Lower Bound
by Christoffer Koch and Julieta Yung
}
T
ABSTRACT: Macroeconomic he Federal Reserves Federal The impact of macroeconomic sur-
Open Market Committee prises on asset prices changed during
surprises involving the ZLBin terms of composition and
meets eight times a year in
employment and inflation Washington to set monetary importancedomestically and interna-
reflecting the Feds attempts policy. Regional Federal Reserve Banks tionally.2 Domestic financial markets put
to achieve its dual mandate to and the staff of the Board of Governors a greater focus on indicators depicting
produce economic forecasts for each of the housing sector, which had led to the
promote full employment and recession and inhibited the recovery.
these meetings. Projections are updated
price stabilityincreased in based on macroeconomic data releases Additionally, there was added interest
importance during the zero- during the intermeeting period. in news directly related to the Feds dual
lower-bound period. Also, These periods usually feature one or mandateto promote full employment
two employment reports, vintage releas- and price stabilitysuch as initial jobless
market participants were more claims and Consumer Price Index (CPI)
es of gross domestic product (GDP),
attentive to housing market inflation data such as producer and con- inflation.
indicators and final GDP sumer prices and other macroeconomic In light of this new environment, it
revisions. indicators that yield new information is important to study how markets react
about the health of the U.S. economy. to updates on the state of the economy.
Thus, macroeconomic announcements Interest rate futures provide a view of
play an important role in updating poli- expected domestic conditions, while
cymakers and the publics assessment of exchange rate futures offer a global
the U.S. economy. perspective on the U.S. outlook. In each
The conduct of monetary policy case, our analysis relies on a comparison
changed substantially in the aftermath of intraday asset prices following U.S.
of the global financial crisis. The Feds macroeconomic surprises.
typical pre-2009 policy instrument was The ZLB period was very different from
adjustment of the federal funds rate. the previous monetary policy regimes in
After the downturn, policymakers set the terms of the nature of Fed policy commu-
federal funds rate at near zerothe zero nication and policy setting itself. It brought
lower bound (ZLB)and the Feds mon- the introduction of unconventional quan-
etary policy statements about the path titative tools to stimulate the economy.
of interest rates became more explicitly The tools included quantitative easing
linked to the anticipated evolution of increasing the money supply by purchas-
inflation and unemployment, known as ing Treasuries and mortgage-backed
forward guidance.1 securities and the maturity-extension
Economic Letter
program, with the Federal Reserve shifting than the 245,000 jobs expected in the a decline in their implied interest rates,
its balance-sheet holdings of Treasuries to Bloomberg expectations survey. Payroll as well as a depreciation of the U.S. dollar
longer-term debt. figures are subject to sometimes sub- within a very tight time interval around
stantial adjustment. The report included the announcement (Charts 1 and 2).
Reacting to Disappointing News a revision of the previous two reporting Because the employment data release
The April 3, 2015, unemployment months. With those changes, the actual was likely the only new information com-
report illustrates a reaction to disap- overall negative surprise grew from ing out during this very short time peri-
pointing news. The statement, detailing 119,000 to 188,000 jobs. od, these price responses illustrate the
March activity, reported that the econ- This development led to an increase reaction of interest and exchange rates to
omy added 126,000 jobssharply lower in Treasury note futures prices and, thus, employment report surprises.
Macroeconomic Surprises
Chart The impact of a macroeconomic
1 Treasury Futures Rise After Employment Report Disappoints surprise can be viewed in terms of the
difference in an assets price after an
Index, 7:30 = 100 announcement and its expected value
101.5 prior to the actual release of informa-
Nonfarm payroll report
(7:30 a.m. April 3, 2015) tion. Although it is difficult to measure
30-Year Treasury
10-Year Treasury
market expectations, they can be proxied
101.0
5-Year Treasury by financial instruments that are set to be
2-Year Treasury traded in the future and, thus, incorpo-
100.5 rate market expectations.
Another way to infer what markets
100.0
expect prior to a particular macroeco-
nomic announcement is to directly ask
investors what they anticipate before the
99.5 data are published. To this end, a variety
U.S. central
of data aggregators and news outlets sur-
time zone
99.0 vey market participants leading up to the
0:40 2:00 3:20 4:40 6:00 7:20 8:40 10:00 release. Where significant, the difference
between the survey response and the
NOTES: The dashed line indicates the exact time the unemployment report was released. Treasury futures prices
immediatly increased, indicating lower yields at different maturities, as disappointing news in the U.S. labor market was
actual news report, or surprise, can be
announced. interpreted as an update on the state of
SOURCES: Tick Data; Bloomberg. the U.S. economy.3
The response of 10-year Treasury
Chart futures prices and currency futures using
2 U.S. Dollar Depreciates After Employment Report Disappoints intraday data within a 15-minute sym-
metric window around the exact time
Index, 7:30 = 100 of the release of macroeconomic news
captures the markets reaction to the
101.5 Nonfarm payroll report
Euro surprise. Although markets respond to a
(7:30 a.m. April 3, 2015)
Japanese yen variety of news in a given day, consider-
101.0 Australian dollar ing the change in asset prices 15 minutes
Canadian dollar
before and after data are made public
British pound
100.5 helps narrow down the responses to spe-
cific announcements.
The analysis requires a regression of
100.0
price changes in 10-year U.S. Treasury
note futures and currency futures on
99.5 macroeconomic surprises during two
U.S. central subsamplesbefore the ZLB (1996
time zone
99.0 2008) and during the ZLB (200916).
0:40 2:00 3:20 4:40 6:00 7:20 8:40 10:00 Foreign-exchange futures are expressed
in U.S. dollars so that an increase in the
NOTES: The dashed line indicates the exact time the unemployment report was released. Currency futures prices exchange rate indicates a depreciation of
immediatly increased, indicating a decpreciation of the U.S. dollar relative to other currencies as disappointing news in the
U.S. labor market was announced. the U.S. dollar relative to a foreign cur-
SOURCES: Tick Data; Bloomberg. rency. The surprises are normalized to
Notes
Chart 1
Motivated by the increased importance of macroeco-
4 Dollar/Euro Futures Less Sensitive to U.S. News Post-2008
nomic news for the more forward-looking central bank
communication at the ZLB, Measuring the Effect of the
Housing: Existing-home sales Zero Lower Bound on Medium- and Longer-Term Inter-
Housing: Housing permits Pre-2009
est Rates, by Eric T. Swanson and John C. Williams,
Housing: Housing starts Post-2008
Housing: New-home sales American Economic Review, vol. 104, no. 10, 2014, pp.
Initial jobless claims 3,15485, estimated the time-varying sensitivity of do-
Nonfarm payrolls
mestic yields along the yield curve to establish the extent
Real GDP growth: Advance
Real GDP growth: Second to which policy was effectively constrained by the ZLB.
Real GDP growth: Final 2
A taxonomy accounting for heterogeneity in macroeco-
Inflation: Consumer Price Index nomic news effects on asset prices can be found in Is
Inflation: Producer price index
Personal income the Intrinsic Value of Macroeconomic News Announce-
Personal spending ments Related to Their Asset Price Impact? by Thomas
Retail sales Gilbert, Chiara Scotti, George Strasser and Clara Vega,
Consumer confidence
European Central Bank, Working Paper no. 1882, Febru-
Consumer sentiment: Preliminary
Consumer sentiment: Final ary 2016.
Industrial production 3
Previous research has shown that these survey-based
Durable goods orders
market expectations are similar to forecasts derived
Factory orders
ISM manufacturing index from financial instruments built on the underlying
macroeconomic news releases. See Macroeconomic
30 25 20 15 10 5 0 5 10 15 20 Derivatives: An Initial Analysis of Market-Based Macro
Magnitude of response (basis points)
Forecasts, Uncertainty, and Risk, by Refet Grkaynak
NOTES: Horizontal bars display the responses of U.S. dollar/euro futures prices to normalized macroeconomic surprises, and Justin Wolfers, in NBER International Seminar on
with the black spikes indicating a one-standard-error confidence band for each estimated response before (blue) and
during (orange) the zero lower bound (ZLB). During the ZLB, responses are more muted, reflecting lower sensitivity to Macroeconomics 2005, Jeffrey Frankel and Christopher
U.S. news. ISM is the Institute for Supply Management.
Pissarides ed., pp. 1150.
SOURCE: Authors calculations. 4
Positive surprises describe higher than expected
values. This is opposite for weekly initial claims for
informational content embedded in the recession and inhibited the recovery. unemployment. The interpretation of inflation surprises
macroeconomic data releases. This They also show stronger responses to is more ambiguous because higher-than-expected infla-
analysis provides a snapshot of what the weekly initial jobless claims and to CPI tion could be considered good or bad depending on the
markets believe to be the current state inflation readings, consistent with the inflations level relative to the target.
of the economy and where it is heading Fed policy mandate and policymakers 5
Key Secular Trends and Implications for Monetary
relative to other economies. Changes in continuing commitment to attain mon- Policy, speech by Robert S. Kaplan, Federal Reserve
those responses hint at where markets etary policy objectives. Bank of Dallas, Aug. 2, 2016, www.dallasfed.org/news/
and policymakers perceive risks to the speeches/kaplan/2016/rsk160802.aspx.
current economic outlook. Koch is a senior research economist and 6
These results are in line with the literature that has
Asset prices responses suggest a Yung is a research economist in the Re- previously found that the link between macroeconomic
greater focus on the housing market in search Department at the Federal Reserve news and bond markets is simpler and stronger than with
line with the vulnerabilities that led to Bank of Dallas. foreign exchange markets.