The Norges Bank's key rate projections and the news element of monetary policy: A wavelet based jump detection approach

Lars Winkelmann

No 2010-062, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: This paper investigates the information content of the Norges Bank's key rate projections. Wavelet spectrum estimates provide the basis for estimating jump probabilities of short- and long-term interest rates on monetary policy announcement days before and after the introduction of key rate projections. The behavior of short-term interest rates reveals that key rate projections have only little effects on market's forecasting ability of current target rate changes. In contrast, longer-term interest rates indicate that the announcement of key rate projections has significantly reduced market participants' revisions of the expected future policy path. Therefore, the announcement of key rate projections further improves central bank communication.

Keywords: central bank communication; interest rate projections; wavelets; jump probabilities (search for similar items in EconPapers)
JEL-codes: C14 E52 E58 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2010-062

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