Asymmetric Responses of Nominal Rates, TIPS Rates, Break-Even Inflation Rates, and the Stock-Bond Correlation to Macroeconomic Announcements

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dc.contributor.advisor Michael Brandt, Committee Member en_US
dc.contributor.advisor Walter Thurman, Committee Member en_US
dc.contributor.advisor Denis Pelletier, Committee Member en_US
dc.contributor.advisor Douglas Pearce, Committee Chair en_US Darwin, Robert William en_US 2010-08-19T18:14:02Z 2010-08-19T18:14:02Z 2010-03-29 en_US
dc.identifier.other etd-03112010-142326 en_US
dc.description.abstract Utilizing daily instantaneous forward rates of nominal and inflation-indexed bonds as well as realizations of stock and bond index returns, I examine the informational content of a broad set of macroeconomic announcements. I find evidence that, with a few exceptions, price variables mainly move break-even inflation rates, while real variables move TIPS rates and/or break-even inflation rates. An analysis of movements in the stock-bond correlation finds that, with some exceptions, expected future interest rates are the important component of the informational content of expansionary announcements to production variables and employment variables. In recessions, I find evidence that expectations of future economic growth or an equity risk premium are the important news conveyed by shocks to some production and employment variables, again with some exceptions. Similarly, for price variables I find evidence that in expansions shocks either proxy for future economic activity or provide information about expected future nominal rates which investors mistakenly use to value equities rather than expected real rates. In recessions (at least for core PPI) some evidence points to the news content referencing future economic growth or the equity risk premium. Consistent with previous results in the literature, results on movements in the stock-bond correlation agree with rising correlations in expansions and falling correlations in recessions. Additionally, in looking at monetary policy shocks to the federal funds target rate I notice that expectations of growth or the equity risk premium are embedded in shocks that `go against the grain' of the expected path given an economic state (negative expansionary and positive recessionary shocks). Formal tests for state and sign asymmetries in the magnitudes of responses to macroeconomic shocks generally yield sparse significant results, though for production variables mainly indicate greater effects of expansionary over recessionary and negative over positive shocks, with some exceptions. Finally, state asymmetry in the response of TIPS rates to monetary policy announcements indicates long-run expansionary momentum and long-run recessionary reversal in monetary policy. en_US
dc.rights I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dis sertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to NC State University or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. en_US
dc.subject break-even inflation en_US
dc.subject TIPS rates en_US
dc.subject macroeconomic surprises en_US
dc.subject asymmetry en_US
dc.subject stock-bond correlation en_US
dc.title Asymmetric Responses of Nominal Rates, TIPS Rates, Break-Even Inflation Rates, and the Stock-Bond Correlation to Macroeconomic Announcements en_US PhD en_US dissertation en_US Economics en_US

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