Niklas Kroner

I am a 5th year PhD candidate in economics at the University of Texas at Austin.

Primary Fields: Macroeconomics, Monetary Economics

Secondary Fields: International Macroeconomics, Financial Economics


CV: here

Web Profiles: linkedin, twitter, google scholar

Mailing Address: Department of Economics, University of Texas at Austin

2225 Speedway C3100, Austin, TX 78712

Working Papers

with Christoph E. Boehm | March 2021

Abstract: A large literature uses high-frequency changes in interest rates around FOMC announcements to study monetary policy. These yield changes have puzzlingly low explanatory power for the stock market - even in a narrow 30-minute window. We propose a new approach to test whether the unexplained variation represents monetary policy news or just noise. In particular, we allow for a latent "Fed non-yield curve shock'', which we estimate via a heteroskedasticity-based procedure. Using a test for weak identification, we show that our shock is well identified, that is, the unexplained variation is not just noise. We then go on to show that the shock, signed to increase stock prices, leads to sizable declines in the equity and variance premium, an increase in the 10-year term premium, an increase in short-run inflation expectations, as well as a dollar depreciation against multiple non-safe-haven currencies. Hence, the evidence supports the interpretation that the shock affects risk-appetite and leads to a reverse "flight-to-safety'' effect. Lastly, using a method from the computational linguistics literature, we show that our shock can be linked to specific topics discussed in FOMC statements, suggesting that it reflects written communication by the Federal Reserve.

Other versions: SSRN

with Christoph E. Boehm | November 2020 (submitted) slides

Previously titled "What does high frequency identification tell us about the transmission and synchronization of business cycles?"

Abstract: We provide evidence for a causal link between the US economy and the global financial cycle. Using a unique intraday dataset, we show that US macroeconomic news releases have large and significant effects on global risky asset prices. Stock price indexes of 27 countries, the VIX, and commodity prices all jump instantaneously upon news releases. The responses of stock indexes co-move across countries and are large - often comparable in size to the response of the S&P 500. Further, US macroeconomic news frequently explains more than 15% of the quarterly variation in foreign stock markets. The joint behavior of stock prices and long-term bond yields suggests that systematic US monetary policy reactions to news do not drive the estimated effects. Instead, the evidence is consistent with a direct effect on investors' risk-taking capacity. Our findings show that a byproduct of the United States' central position in the global financial system is that news about its business cycle has large effects on global financial conditions.

Other versions: SSRN, RSIE Working Paper

Presentations: Bocconi*; ESWM 2020; AEA 2021*; RES 2021; SED 2021 (scheduled); SMYE 2021 (scheduled); NASMES 2021 (scheduled); CEA 2021 (scheduled)