scholarly journals The influence of central bank monetary policy announcements on cryptocurrency return volatility

2017 ◽  
Vol 14 (4) ◽  
pp. 60-72 ◽  
Author(s):  
Shaen Corbet ◽  
Grace McHugh ◽  
Andrew Meegan
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Interest Rates ◽  
The United States ◽  
Open Market ◽  
Estimation Model ◽  
Federal Open Market Committee ◽  
International Currencies ◽  
Asset Class ◽  
International Monetary Policy

The emergence of Bitcoin in 2009 has received considerable attention surrounding the validity of cryptocurrencies as a viable and, in some jurisdictions, a legal currency alternative. Despite widespread concern that these cryptocurrencies are fostering the environment within which a substantial bubble can occur, it is important to analyze whether these new assets are behaving similarly to major international currencies. This paper investigates the effects of international monetary policy changes on bitcoin returns using a GARCH (1.1) estimation model. The results indicate that monetary policy decisions based on interest rates taken by the Federal Open Market Committee in the United States significantly impact upon bitcoin returns. After controlling for international effects, we find significant evidence of volatility effects driven by United States, European Union, United Kingdom and Japanese quantitative easing announcements. These results show that, despite its nature and ideals, bitcoin seems to be subject to the same economic factors as traditional fiat currencies, and is not entirely unaffected by government policies. This result has implications for investors using bitcoin as a hedging or diversification tool. In addition, we contribute to the existing debate regarding the classification of bitcoin as an asset class, by illustrating that bitcoin volatility exhibits various reactions that bear resemblance to both currency pairs and store-of-value assets.

Understanding Interest Rates and the Economy

2019 ◽  
pp. 81-110 ◽  
Author(s):  
Alan N. Rechtschaffen
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Interest Rates ◽  
Federal Reserve ◽  
Balance Sheet ◽  
The United States ◽  
Federal Reserve System ◽  
Federal Open Market Committee ◽  
Reserve Banking ◽  
Reserve System

This chapter begins with a discussion of the Federal Reserve and the Federal Reserve Banking System. The Federal Reserve System was created by Congress under the Federal Reserve Act “to provide for the establishment of federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States and for other purposes.” The Federal Reserve System comprises a central Board of Governors appointed by the president of the United States and confirmed by the Senate, and 12 regional Reserve banks. Monetary policy is set by the Federal Open Market Committee (FOMC). The remainder of the chapter covers monetary policy, quantitative easing, balance sheet normalization and the FOMC minutes.

Political Pressures on Monetary Policy During the US Great Inflation

2012 ◽  
Vol 4 (2) ◽  
pp. 33-64 ◽  
Author(s):  
Charles L Weise
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Federal Reserve ◽  
The United States ◽  
Executive Branch ◽  
The Political ◽  
Political Environment ◽  
Open Market ◽  
Federal Open Market Committee ◽  
The Us

Drawing on an analysis of Federal Open Market Committee (FOMC) documents, this paper argues that political pressures on the Federal Reserve were an important contributor to the rise in inflation in the United States in the 1970s. Members of the FOMC understood that a serious attempt to tackle inflation would generate opposition from Congress and the executive branch. Political considerations contributed to delays in monetary tightening, insufficiently aggressive anti-inflation policies, and the premature abandonment of attempts at disinflation. Empirical analysis verifies that references to the political environment at FOMC meetings are correlated with the stance of monetary policy during this period. (JEL D72, E32, E52, E58, N12)

scholarly journals The Effect of FOMC Votes on Financial Markets

2019 ◽  
Vol 101 (5) ◽  
pp. 921-932
Author(s):  
Carlos Madeira ◽  
João Madeira
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Financial Markets ◽  
Interest Rates ◽  
Stock Prices ◽  
Open Market ◽  
Federal Open Market Committee ◽  
2008 Financial Crisis ◽  
Treasury Securities ◽  
Stock Market Reaction

This paper shows that since votes of members of the Federal Open Market Committee have been included in press statements, stock prices increase after the announcement when votes are unanimous but fall when dissent (which typically is due to preference for higher interest rates) occurs. This pattern started prior to the 2007–2008 financial crisis. The differences in stock market reaction between unanimity and dissent remain, even controlling for the stance of monetary policy and consecutive dissent. Statement semantics also do not seem to explain the documented effect. We find no differences between unanimity and dissent with respect to impact on market risk and Treasury securities.

Chapter II. The World Economy

1991 ◽  
Vol 136 ◽  
pp. 34-59
Author(s):  
Andrew Gurney ◽  
Jan Willem In't Veld ◽  
Ray Barrell
Keyword(s):  
United States ◽  
Monetary Policy ◽  
United Kingdom ◽  
Interest Rates ◽  
World Economy ◽  
The United States ◽  
National Accounts ◽  
Short Term ◽  
Percentage Points ◽  
The World

GNP growth in the major seven economies continues to decline from the cyclical peak reached in 1988. The latest national accounts statistics show that all major seven economies are now growing more slowly than they did last year, with the United States, United Kingdom and Canada in recession. This slowdown in activity appears to have been caused primarily by the tightening of monetary policy that occurred between 1988 and 1990. Short-term interest rates rose by 4.4 percentage points in Germany between 1987 and 1990, by 3 percentage points in Japan between 1987 and 1990, and by 2.2 per cent in the United States between 1987 and 1989.

MONETARY POLICY AND GOVERNMENT DEBT MANAGEMENT DURING THE CORONAVIRUS PANDEMIC

2021 ◽  
Vol 255 ◽  
pp. 79-84
Author(s):  
William A. Allen
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Interest Rates ◽  
The United States ◽  
Central Banks ◽  
Debt Management ◽  
Budget Deficits ◽  
Short Term ◽  
Government Bonds ◽  
The United Kingdom

This paper describes how the large budget deficits of 2020 in the United States and the United Kingdom were financed, how central banks are in practice managed not just short-term interest rates but also yields on government bonds, and how their ability to resist a post-coronavirus surge in inflation has been compromised.

Crafting Consensus

2020 ◽  
pp. 1-18
Author(s):  
Nicole Baerg
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Information Aggregation ◽  
Policy Statement ◽  
Single Individual ◽  
Open Market ◽  
Federal Open Market Committee ◽  
Policy Makers ◽  
Monetary Policy Committee ◽  
Central Bankers

This chapter introduces central bankers as “wordsmiths,” skilled users of words, who work together to construct and edit a monetary policy statement with an intention to drive the economy by shaping the public’s beliefs about the future. The chapter starts off showing that central bankers can be both relatively vague and relatively precise with the language that they use. Baerg highlights previous explanations on the benefits of delegating monetary policy to a monetary policy committee rather than to a single individual. Known benefits include better information aggregation and problem-solving. The author introduces the argument that monetary policy committees that have diverse policy preferences are more likely to be precise and illustrates, using examples from Federal Open Market Committee (FOMC) transcript data, how policy makers bargain over the policy statement in ways similar to how they negotiate changes in interest rates. The chapter concludes with a brief overview of the structure of the manuscript.

scholarly journals Monetary Policy Tightening and Long-Term Interest Rates

2013 ◽  
pp. 1-6
Author(s):  
Pedro Amaral
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Financial Market ◽  
Policy Tools ◽  
Open Market ◽  
Federal Open Market Committee ◽  
Market Participants ◽  
Economic Developments

The Federal Open Market Committee (FOMC) has maintained an accommodative monetary policy ever since the 2007 recession, and some financial market participants are concerned that long-term interest rates may increase more than should be expected when the Committee starts to tighten. But a look at five historical episodes of monetary policy tightening suggests that such an outcome is more likely when markets are surprised by policy actions or economic developments. Given the Fed's new policy tools, especially its evolution toward more transparent communications, the odds of a surprise are far less likely now.

Monetary Policy, Loan Liquidation, and Industrial Conflict: The Federal Reserve and the Open Market Operations of 1932

1984 ◽  
Vol 44 (4) ◽  
pp. 957-983 ◽  
Author(s):  
Gerald Epstein ◽  
Thomas Ferguson
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Federal Reserve ◽  
Gold Standard ◽  
The United States ◽  
Open Market ◽  
Federal Reserve System ◽  
Industrial Conflict ◽  
Reserve System ◽  
Bank Profits

Early in 1932 the Federal Reserve System made a serious attempt to reverse the “Great Contraction” throught expansionary open market operations, but abandoned it a few months later. In this paper we offer an interpretation of the episode that throws new light on the Fed's behavior during the Depression. Key are the attitude of private bankers, Britain's abandonment of the gold standard, and the brief open market campaign. To protect bank profits the Fed abandoned the program which set the stage for the complete financial collapse of the United States in early 1933.

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