Stocks soar as central bank info shocks boost economy post-policy
Central bank announcements contain two types of information: changes in monetary policy and the central bank's view on the economy. By analyzing how interest rates and stock prices move together after these announcements, researchers found that surprise policy tightening raises interest rates and lowers stock prices, while positive central bank information shocks raise both. These shocks have different effects on the economy, and not considering central bank information biases the understanding of monetary policy impact.