Understanding the impact of monetary policy announcements: The importance of language and surprises
© 2017 Elsevier B.V.Monetary policy announcements have a significant impact on financial market liquidity. This study provides a novel perspective on the factors driving this relationship in the market for 10-year Treasury note futures: Target rate surprises and the complexity of the monetary policy...
| Main Authors: | , |
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| Format: | Journal Article |
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Elsevier
2017
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| Online Access: | http://hdl.handle.net/20.500.11937/62870 |
| _version_ | 1848760932212146176 |
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| author | Smales, Lee Apergis, N. |
| author_facet | Smales, Lee Apergis, N. |
| author_sort | Smales, Lee |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | © 2017 Elsevier B.V.Monetary policy announcements have a significant impact on financial market liquidity. This study provides a novel perspective on the factors driving this relationship in the market for 10-year Treasury note futures: Target rate surprises and the complexity of the monetary policy statement language are important determinants. Differences of opinion resulting from interpretation of complex language appear to result in more trading volume despite relatively low levels of liquidity (a negative liquidity-volume relationship), while large target rate surprises reduce trading activity (a positive liquidity-volume relationship). The dynamic changes over time, as unconventional polices are adopted by monetary authorities and, high frequency traders become more pervasive. Central bankers may aid market liquidity by minimizing surprises, and issuing statements that are easier to understand (with shorter sentences and more familiar words). |
| first_indexed | 2025-11-14T10:23:38Z |
| format | Journal Article |
| id | curtin-20.500.11937-62870 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T10:23:38Z |
| publishDate | 2017 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-628702018-02-06T06:23:10Z Understanding the impact of monetary policy announcements: The importance of language and surprises Smales, Lee Apergis, N. © 2017 Elsevier B.V.Monetary policy announcements have a significant impact on financial market liquidity. This study provides a novel perspective on the factors driving this relationship in the market for 10-year Treasury note futures: Target rate surprises and the complexity of the monetary policy statement language are important determinants. Differences of opinion resulting from interpretation of complex language appear to result in more trading volume despite relatively low levels of liquidity (a negative liquidity-volume relationship), while large target rate surprises reduce trading activity (a positive liquidity-volume relationship). The dynamic changes over time, as unconventional polices are adopted by monetary authorities and, high frequency traders become more pervasive. Central bankers may aid market liquidity by minimizing surprises, and issuing statements that are easier to understand (with shorter sentences and more familiar words). 2017 Journal Article http://hdl.handle.net/20.500.11937/62870 10.1016/j.jbankfin.2017.03.017 Elsevier restricted |
| spellingShingle | Smales, Lee Apergis, N. Understanding the impact of monetary policy announcements: The importance of language and surprises |
| title | Understanding the impact of monetary policy announcements: The importance of language and surprises |
| title_full | Understanding the impact of monetary policy announcements: The importance of language and surprises |
| title_fullStr | Understanding the impact of monetary policy announcements: The importance of language and surprises |
| title_full_unstemmed | Understanding the impact of monetary policy announcements: The importance of language and surprises |
| title_short | Understanding the impact of monetary policy announcements: The importance of language and surprises |
| title_sort | understanding the impact of monetary policy announcements: the importance of language and surprises |
| url | http://hdl.handle.net/20.500.11937/62870 |