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We examine how regularly scheduled macroeconomic announcements for the U.S., Germany and the euro area affect the German stock market, using high-frequency, minute-by-minute DAX data. Our study extends the literature on high-frequency announcement effects in several ways. First, we account for endogenous return dynamics by assessing announcement impacts via response analysis. Second, we examine the announcements effects on market volatility in a more detailed fashion by distinguishing effects of positive and negative surprises. Finally, we adapt the standard weighted-least-squares approach to more adequately analyze both conditional mean and volatility effects.

The field of econometrics has gone through remarkable changes during the last decades. The earlier focus on testing macroeconomic theories has been widened considerably. It has turned into a discipline concerned with the development and application of statistical methods for any kind of economic data. Contributions to Modern Econometrics represents a collection of recent economic applications of modern econometrics and methodological developments

We introduce a dynamic banking-macro model, which abstains from conventional mean-reversion assumptions and in which - similar to Brunnermeier and Sannikov (2010) - adverse asset-price movements and their impact on risk premia and credit spreads can induce instabilities in the banking sector. To assess such phenomena empirically, we employ a multi-regime vector autoregression (MRVAR) approach rather than conventional linear vector autoregressions. We conduct bivariate empirical analyses, using country-specific financial-stress indices and industrial production, for the U.S., the UK and the four large euro-area countries. Our MRVAR-based impulse-response studies demonstrate that, compared to a linear specification, response profiles are dependent on the current state of the economy as well as the sign and size of shocks. Previous multi-regime-based studies, focusing solely on the regime-dependence of responses, conclude that, during a high-stress period, stress-increasing shocks have more dramatic consequences for economic activity than during low stress. Conducting size-dependent response analysis, we find that this holds only for small shocks and reverses when shocks become sufficiently large to induce immediate regime switches. Our findings also suggest that, in states of high financial stress, large negative shocks to financial-stress have sizeable positive effects on real activity and support the idea of unconventional monetary policy measures in cases of extreme financial stress.