TY - JOUR
T1 - The impact of monetary surprises on Australian financial futures markets
T2 - an insight into cash rate target announcements
AU - Lu, Xinsheng
AU - Qu, Ling
AU - Zhou, Ying
PY - 2015/9
Y1 - 2015/9
N2 - This paper investigates the impact of unanticipated Australian monetary policy changes on AUD/USD exchange rate futures, and 3-year and 10-year Australian Treasury bond futures, during the period from January 1997 to April 2010. Our study contributes to the literature by using both the 30-day and the 90-day bank accepted bill (BAB) rates to disentangle the unexpected surprise component of monetary policy changes from overall cash rate target changes in the Australian money market, and by concurrently modelling the effects of monetary surprises and other key macroeconomic announcements in Australia. The empirical results suggest that the 30-day BAB rate is the best proxy for the expected monetary policy actions. We find that the effect of monetary surprises on the volatility of the 3- and 10-year bond future instruments is significant and persistent. We have also documented a strong monetary policy effect on the mean returns of the exchange rate futures, indicating that unexpected monetary policy adjustments have a significant impact on the level of the exchange rate movements rather than on the volatility of the FX futures market.
AB - This paper investigates the impact of unanticipated Australian monetary policy changes on AUD/USD exchange rate futures, and 3-year and 10-year Australian Treasury bond futures, during the period from January 1997 to April 2010. Our study contributes to the literature by using both the 30-day and the 90-day bank accepted bill (BAB) rates to disentangle the unexpected surprise component of monetary policy changes from overall cash rate target changes in the Australian money market, and by concurrently modelling the effects of monetary surprises and other key macroeconomic announcements in Australia. The empirical results suggest that the 30-day BAB rate is the best proxy for the expected monetary policy actions. We find that the effect of monetary surprises on the volatility of the 3- and 10-year bond future instruments is significant and persistent. We have also documented a strong monetary policy effect on the mean returns of the exchange rate futures, indicating that unexpected monetary policy adjustments have a significant impact on the level of the exchange rate movements rather than on the volatility of the FX futures market.
UR - http://www.scopus.com/inward/record.url?scp=84941054824&partnerID=8YFLogxK
U2 - 10.1111/1467-8454.12048
DO - 10.1111/1467-8454.12048
M3 - Article
AN - SCOPUS:84941054824
SN - 0004-900X
VL - 54
SP - 151
EP - 166
JO - Australian Economic Papers
JF - Australian Economic Papers
IS - 3
ER -