Central bank information effects and transatlantic spillovers

News about the economy contained in a central bank announcement can affect public expectations. This paper shows, using both event studies and vector autoregressions, that such information effects are an important channel of transatlantic spillover monetary policy. They account for part co-movement German US government bond yields around Fed policy announcements, most this ECB announcements. Consequently, surprise interest rate hikes spill over to reflect good news followed on average by easier, not tighter, financial conditions economic expansion. In fact, they similarly as positive European macroeconomic surprises. By contrast, pure “monetary shocks” do over, because offsetting stance.