How Effective Is Central Bank Forward Guidance?

Clemens Kool and Daniel Thornton

No 1405, Working Papers CASMEF from Dipartimento di Economia e Finanza, LUISS Guido Carli

Abstract: This paper investigates the effectiveness of forward guidance for the central banks of four countries: New Zealand, Norway, Sweden, and the United States. We test whether forward guidance improved market participantsÕ ability to forecast future short-term and long-term rates. We find some evidence that forward guidance improved market participantsÕ ability to forecast short-term rates over relatively short forecast horizons in New Zealand, Norway and Sweden, but not so for the United States. Most effects are small, often insignificant, and vary across benchmarks. In addition, forward guidance induces convergence of survey forecasts for New Zealand, but less so for the other countries, in particular the United States.

Keywords: monetary policy; central bank transparency; interest rates; term structure; forecasting. (search for similar items in EconPapers)
JEL-codes: E43 E47 E52 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: How Effective Is Central Bank Forward Guidance? (2015)
Working Paper: How effective is central bank forward guidance? (2012)
Working Paper: How Effective Is Central Bank Forward Guidance? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:lui:casmef:1405

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