Estimation of Multidimensionality of Monetary Policy Using High-Frequency Data

Abstract

The paper presents an approach to estimating the impact on the yield curve of information from the Bank of Russia’s press releases on the key rate, which was unexpected by the money market. The approach is based on the heteroscedasticity of daily data on federal government bond yields and the indicative ROISfix rate for interest rate swap transactions on the RUONIA rate. I obtain empirical evidence of the effectiveness of the Bank of Russia communication in terms of its objective of stabilising inflation. Estimates for the time period from 2015 to 2021 show that information shocks lead to an increase in nominal interest rates, a decrease in the stock index, a strengthening of the Russian rouble exchange rate, and a deceleration in inflation. I also conclude that the peak of the impact of yield curve information shocks, which are identified using market rate data, is on the horizon of up to one year, and the local maximum or breakpoint in the specifications considered coincides with the horizon of medium-term forecasting of the monetary policy of the Bank of Russia, which indicates the particularity of the formation of the expectations of investors trading Russian government bonds regarding the future monetary policy of the Bank of Russia.