International Spillovers of Forward Guidance Shocks

Callum Jones, Mariano Kulish and Daniel Rees

No 2018/114, IMF Working Papers from International Monetary Fund

Abstract: After 2007, countries that cut their policy interest rates close to zero turned, among other policies, to forward guidance. We estimate a two-country model of the U.S. and Canada to quantify how unexpected changes in U.S. forward guidance affected Canada. Expansionary U.S. forward guidance shocks, like conventional policy shocks, are beggar-thy-neighbor and depress Canadian output, but by twice as much as conventional shocks. We find that the effect of U.S. forward guidance shocks on Canadian output, unlike conventional policy shocks, depends on the state of U.S. demand and can be five times smaller when U.S. demand is weak.

Keywords: WP; monetary policy; Forward Guidance; Spillovers; Unconventional Monetary Policy; Zero Lower Bound; monetary policy shock; feedback rule; open economy; reaction function; fixed interest rate duration; Monetary expansion; Central bank policy rate; Inflation; Consumption; Global (search for similar items in EconPapers)
Pages: 43
Date: 2018-05-15
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: International spillovers of forward guidance shocks (2022)
Working Paper: International spillovers of forward guidance shocks (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2018/114

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