Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 445: Measuring Riksbank Monetary Policy: Shocks and Macroeconomic Transmission

Jakob Almerud (), Dominika Krygier (), Henrik Lundvall () and Mambuna Njie
Additional contact information
Jakob Almerud: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Dominika Krygier: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Henrik Lundvall: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Mambuna Njie: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: We construct and make available a new monetary policy event study database with high-frequency financial market reactions to Riksbank communications, spanning a period of 20 years. Using these data as instruments, we estimate the macroeconomic effects of monetary policy shocks in Sweden. A temporary, unexpected policy rate tightening induces an immediate and persistent appreciation of the krona exchange rate, as well as a gradual, negative response in output and consumer prices. These results are statistically significant, economically meaningful and robust to a number of variations in our econometric specification. In particular, we consider the possibility that financial market reactions to Riksbank communications may consist not only of pure monetary policy shocks, but could also reflect market participants’ updates concerning the central bank’s reaction function.

Keywords: monetary policy surprise database; monetary policy shocks; intraday; event study; proxy VAR; macroeconomic effects

JEL-codes: E43; E44; E52; E58; G14

Language: English

57 pages, December 1, 2024

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