Business Intelligence

Do Macroeconomic Announcements Move Inflation Forecasts?

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Executive Summary

This paper presents an empirical strategy that bridges the gap between event studies and macroeconomic forecasts based on common-factor models. Event studies examine the response of financial variables to a market-sensitive "Surprise" component using a narrow event window. The authors argue that these features - narrow event window and surprise component - can be easily embedded in common-factor models that study the real-time impact of macroeconomic announcements on key policy variables such as inflation or gross domestic product growth.

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