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Central Bank Communication and Correlation between Financial Markets: Canada and the United States

We study the correlation between pairs of bond and stock markets in Canada and the United States between January 1998 and December 2009 in the framework of diagonal-BEKK models. Our research question is whether monetary policy actions and communications by the Bank of Canada and the Federal Reserve...

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Gepubliceerd in:MAGKS - Joint Discussion Paper Series in Economics (Band 01-2012)
Hoofdauteurs: Beck, Melanie-Kristin, Hayo, Bernd, Neuenkirch, Matthias
Formaat: Arbeit
Taal:Engels
Gepubliceerd in: 2012
Onderwerpen:
Central Bank Communication
Federal Reserve
Financial Markets
Diagonal-BEKK Models
Wirtschaft
Dynamic Correlations
Bank of Canada
Economics
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Samenvatting:We study the correlation between pairs of bond and stock markets in Canada and the United States between January 1998 and December 2009 in the framework of diagonal-BEKK models. Our research question is whether monetary policy actions and communications by the Bank of Canada and the Federal Reserve significantly affect the conditional co-movement of financial markets (i) within Canada and (ii) between Canada and the United States. We find that central bank communication significantly increases the correlation of financial markets within and across the two countries and is particularly important for the correlation of Canadian and US long-term interest rates.
Fysieke beschrijving:22 Seiten
ISSN:1867-3678
DOI:10.17192/es2024.0116

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