International spillovers of forward guidance shocks

Callum Jones, Mariano Kulish and Daniel Rees

No 870, BIS Working Papers from Bank for International Settlements

Abstract: We estimate a two-country model of the US and Canada over the post 2009 sample to study the cross-country spillovers of forward guidance shocks. To do so, we propose a method to identify forward guidance shocks during the fixed interest rate regime. US forward guidance shocks have a larger impact than conventional monetary policy shocks. A 2 quarter expansionary forward guidance shock decreases Canadian output by about 0.2% to 0.4% on impact. The effect of US forward guidance shocks on Canadian output, unlike conventional policy shocks, depends crucially on the state of the US risk premium shock. The estimated forward guidance shocks coincide with significant US monetary policy announcements such as the introduction of calendar based guidance.

Keywords: forward guidance shocks; identification; spillovers; zero lower bound (search for similar items in EconPapers)
JEL-codes: E2 E4 E5 F4 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2020-07
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: International spillovers of forward guidance shocks (2022)
Working Paper: International Spillovers of Forward Guidance Shocks (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:870

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