واکنش بازارهای مالی استرالیا به اخبار نرخ بهره بانک مرکزی استرالیا و بانک فدرال ایالات متحده
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|14482||2008||18 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Research in International Business and Finance, Volume 22, Issue 3, September 2008, Pages 378–395
This paper provides comprehensive evidence on the impacts of the Reserve Bank of Australia's (RBA) and the U.S. Fed's target interest rate announcement news on the Australian financial markets over the period 1998–2006. The RBA's news had a significant impact on the first moments of market returns/changes in line with a priori expectations, and the conditional volatility in most of the markets was significantly higher following the news. Asymmetric news effect is also observed for the Australian interest rates where markets tended to respond more strongly to unexpected rate rises than rate falls. While the U.S. Fed's news influenced only the USD/AUD exchange rate, the Australian market volatility was significantly lower in all market segments following the Fed's news.
There is a growing body of literature examining the news contents of central banks’ interest rate target announcements. The investigations are aimed at ascertaining the presence and the nature of the news effects on financial markets. Recently, attention has also been directed to the spillover effects of one central bank's announcement news on another country's financial markets. Since the abandonment of monetary aggregate targeting in the mid-1980s, central banks of advanced countries have moved to targeting policy interest rates. These target interest rates are formally announced and any change thereof constitutes an adjustment in the monetary policy stance. As interest rates of longer maturities are determined by the expected levels of the target rate over the relevant time horizon, any change in the target rate has an immediate impact on other short-term interest rates.1 Financial market participants must take positions based upon their expectations on the impending announcements of a central bank's target interest rate stance. This expected part is thus already factored into the market prices observed immediately prior to the announcement. If the actual target rate announced is different from that already priced, markets react to this surprise (or news) component accordingly. Thus, central banks influence financial markets through their control over the target interest rates and the markets’ expectation on the future courses of the respective target rates. The current literature mostly concentrates on the impacts of monetary policy news of the U.S. Federal Reserve's federal funds target rate. The Fed's interest rate news effects have been investigated on the U.S. equity market (Bomfim, 2003, Bernanke and Blinder, 1992, Bernanke and Kuttner, 2005 and Lee, 2006), and on the U.S. debt markets (Cook and Hahn, 1989, Demiralp and Jorda, 2004, Gulley and Sultan, 2003, Kuttner, 2001, Roley and Sellon, 1995 and Roley and Sellon, 1998). Furthermore, the spillover impacts of the Fed's interest rate news have been investigated by a number of researchers. These include Bredin et al. (2005) on the Irish stock market, Ehrmann and Fratzscher, 2003 and Ehrmann and Fratzscher, 2005 on the Euro area money markets, and Hausman and Wongswan (2006) on the stock, debt and foreign exchange markets of 49 countries. The Fed's interest rate news has shown to be transmitted to these markets and the spillover effects are strongly felt. However, the transmission in the opposite direction is found to be weak (Ehrmann and Fratzscher, 2005). In Australia, the Reserve Bank of Australia (RBA) started to announce its target interest rate (the overnight cash rate) from January 1998. The RBA Board's decision on the rate (whether or not there is a change) is announced in a media release, which states the new target for the cash rate (if there is a change) together with the rationale for the decision. The literature on the RBA's cash rate announcement effect is limited to the investigation of the announcement impact on the first moments of Australian market returns (e.g. Gasbarro and Monroe, 2004 and Diggle and Brooks, 2007). The common limitation of these studies is that they only examine the overall impact of cash rate announcements rather than concentrating on the surprise or news component to which markets are responding. We aim to address this oversight by investigating the RBA's cash rate announcement news effects on both the first and second moments of daily returns/changes in the Australian debt, foreign exchange and stock markets for the period 1998–2006. Furthermore, the literature is missing a thorough investigation of the spillover effects of the U.S. Fed's interest rate announcement news on the Australian financial markets. This is another oversight in the literature as the information leadership role of the U.S. in Australia is well documented. For instance, Kim and Sheen (2000) show that the Australian interest rates (90-day and 10-year rates) react strongly to the first and second moments of the corresponding U.S. rate movements. Masih and Winduss (2006) report a straightforward cointegration relationship between the Australian and the U.S. interest rates, whereas Narayan and Smyth (2004) show similar evidence for the stock markets. Kim (2005) reports a direct causal information flow from the U.S. stock market to that of Australia. Thus, in this paper, we have the dual aim of firstly investigating the role played by the RBA's interest rate news in the Australian debt, foreign exchange and stock markets, and secondly, documenting and discussing the existence and the nature of the transmission of the U.S. Fed's interest rate news on the Australian financial markets. The main findings of this paper are summarized as follows. First, we find evidence that the RBA's target interest rate news has statistically significant impacts on the daily returns/changes in all three financial market segments in line with prior expectations. In particular, an unexpected rise in the target rate led to a proportional increase in interest rate changes, spot and forward USD/AUD exchange rate returns and two banking stock returns. In addition, the new effects were stronger at the short-term ends of the spectrum for the interest rates and forward exchange rates. This is consistent with the general finding in the literature where the announcement news impact is observed to be weaker at the longer ends. Second, RBA's target rate news increased the volatility in most cases. This suggests that an unexpected change in the target rate creates further uncertainty regarding future rate changes and hence a higher volatility in most of the markets on the days of target rate announcements. Third, there is weak evidence for an asymmetric news effect where markets tended to have a stronger reaction to unexpected rate rises than unexpected rate falls. Fourth, the U.S. Fed's target interest rate news significantly reduced the volatility in the Australian markets following similar volatility-reducing effects in the U.S. markets (foreign exchange and stock markets). We conjecture that the Fed's interest rate news reduced the degree of uncertainty in these U.S. markets and this lower volatility environment was transmitted to the Australian markets. The rest of the paper is organized as follows: Section 2 discusses the nature of the data used in this paper and the empirical modeling issues are discussed in detail in Section 3. Section 4 provides the analyses on the empirical investigation results, and Section 5 concludes the paper.
نتیجه گیری انگلیسی
This paper provides comprehensive evidence on the impacts of the RBA's and the U.S. Fed's target interest rate news on the various segments of the Australian financial markets. We report a number of important findings. First, we find that the RBA's target interest rate news has statistically significant impacts on the conditional means of the daily returns/changes in the Australian debt, foreign exchange and stock markets. Unexpected rate rise announcements significantly raised the 90-day bank bill and the 3-year government bond interest rates, appreciated the USD/AUD exchange rate in the spot and 1- and 3-month forward markets, and stimulated two bank stock returns (NAB and WBC). In addition, we find that the news effect is stronger at the short-term ends of the interest rates and forward exchange rates. Second, we find that the news raised the level of volatility in most cases. Apparently, when markets were caught by surprise the implications of the changes were interpreted differently in the markets. The resulting heterogeneity of opinions would have led to an increased volume of trade and hence higher volatilities on the days of the announcements with an unexpected target rate change. Third, we find some evidence for asymmetric effects of policy surprises. Markets tend to respond more strongly to unexpected rate rises than rate falls, in general. Fourth, the U.S. Fed's target rate news significantly reduced the volatility in the Australian markets. We argue that this is due to (i) the market momentum in the U.S. of the volatility-reducing effect of the Fed's news was spilt over to the Australian market leading to similar reductions in volatility, (ii) and to the Fed's news resolving the level of uncertainly in Australia regarding the U.S. economy which has a direct bearing on that of the Australia's. These findings have important implications for policy makers and market participants alike. By providing comprehensive evidence on not only the RBA's target interest rate announcement news effects but also on the spillover effects of the U.S. Fed's target interest rate news on various segments of the Australian financial markets, this research provides an enhanced understanding of the short-term transmission mechanism of the interest rate news. An interesting extension would be to examine higher frequency responses to the interest rate announcement news in Australia. We leave this avenue for future studies.