Bank of Canada working paper investigates market movers

In a working paper published in February by the Bank of Canada, author Scott Hendry examines whether central bank communication or the media's interpretation of events prove to have greater influences on the markets.

Hendry states the goal of this paper is to "investigate what type of information from Bank of Canada communication statements or the market commentary based on these statements has a significant effect on the volatility or level of returns in a short-term interest rate market".

He finds that discussions of oil prices, the Canadian dollar, the inflation projection and whether the economy is at capacity and certain forward-looking statements significantly increased volatility.

Meanwhile, market news stories often offset the effects of the Bank's communication statements and were much more likely to increase market volatility while the Bank reduced it, the paper states.

Click here to read the paper.