Monetary Policy with Flexible Exchange Rates and Forward Interest Rates as Indicators

Lars Svensson

No 941, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In the new situation with flexible exchange rates, monetary policy in Europe will have to rely more on indicators than previously under fixed rates. One of the potential indicators, the forward interest rate curve, can be used to indicate market expectations of the time-paths of future short interest rates, monetary policy, inflation rates and currency depreciation rates. The forward rate curve separates market expectations for the short, medium and long term more easily than the standard yield curve. Monetary policy in Germany, France, Sweden, the United Kingdom and the United States is interpreted with the help of forward rates.

Keywords: Exchange Rate Policy; Monetary Policy Indicators; Term Structure of Interest Rates (search for similar items in EconPapers)
JEL-codes: E50 E52 F31 G12 (search for similar items in EconPapers)
Date: 1994-04
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Citations: View citations in EconPapers (40)

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Related works:
Working Paper: Monetary Policy with Flexible Exchange Rates and Forward Interest Rates as Indicators (1994)
Working Paper: Monetary Policy with Flexible Exchange Rates and Foreward Interest Rates as Indicators (1993)
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