The role of FOMC minutes for US asset prices before and after the 2008 crisis: Evidence from GARCH volatility modeling

• We study the impact of released FOMC minutes on US asset prices.
• Data for fixed income assets, exchange rates of the dollar and a House Price Index.
• The results find strong effects on asset prices (both their mean and volatility).
• The impact is valid only prior to the 2008 crisis.
• After the crisis these effects turn out to be weaker.

This study explores the impact on US asset prices of novel data from minutes released by the Federal Open Market Committee. With data from fixed income assets, the main exchange rates of the US dollar, a House Price Index and various GARCH modeling, the empirical findings document significant effects of those minutes on the mean and volatility of asset prices only before the 2008 crisis. After the crisis, these effects become weaker, which is possibly attributable to the stronger transparency of monetary policy decisions as well as the implementation of monetary policy that persistently leads interest rates close to the zero lower bound, where they carry a weaker informational content. The baseline results survive a number of robustness tests. In addition, the findings are expected to provide important insight for monetary policymakers and market participants as they provide significant information on how well decisions are anticipated by market participants and how they adjust their views about future monetary policy, output growth, and inflation.