TY  - JOUR
AU  - Rigobon, Roberto
AU  - Sack, Brian
TI  - Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12420
PY  - 2006
Y2  - August 2006
DO  - 10.3386/w12420
UR  - http://www.nber.org/papers/w12420
L1  - http://www.nber.org/papers/w12420.pdf
N1  - Author contact info:
Roberto Rigobon
MIT Sloan School of Management
100 Main Street, E62-516
Cambridge, MA 02142
Tel: 617/258-8374
Fax: 617/258-6855
E-Mail: rigobon@mit.edu

Brian Sack
Executive Vice President and Head of Markets Group
Federal Reserve Bank of New York
33 Liberty Street
New York, NY 10045
E-Mail: brian.sack@deshaw.com
M1  - published as Roberto Rigobon, Brian Sack. "Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices," in John Y. Campbell, editor, "Asset Prices and Monetary Policy" University of Chicago Press (2008)

AB  - The current literature has provided a number of important insights about the effects of macroeconomic data releases on monetary policy expectations and asset prices. However, one puzzling aspect of that literature is that the estimated responses are quite small. Indeed, these studies typically find that the major economic releases, taken together, account for only a small amount of the variation in asset prices%u2014even those closely tied to near-term policy expectations. In this paper we argue that this apparent detachment arises in part from the difficulties associated with measuring macroeconomic news. We propose two new econometric approaches that allow us to account for the noise in measured data surprises. Using these estimators, we find that asset prices and monetary policy expectations are much more responsive to incoming news than previously believed. Our results also clarify the set of facts that should be captured by any model attempting to understand the interactions between economic data, monetary policy, and asset prices.
ER  -