Does the Sequence Matter: Interest Rates, Quantitative Easing or Forward Guidance?

Tudor Schlanger, Lena Suchanek, Jonathan Swarbrick, Joel Wagner and Yang Zhang
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Tudor Schlanger: Yale School of Management
Lena Suchanek: Bank of Canada
Joel Wagner: Bank of Canada
Yang Zhang: Bank of Canada

International Journal of Central Banking, 2026, vol. 22, issue 1, 1-46

Abstract: We study the role of unconventional monetary policies during a pandemic, focusing on the implementation sequencing of policies when there is a social containment period. Using the Bank of Canada’s main projection model (ToTEM), we compare the efficacy of a suite of extended monetary policies (EMPs), finding that the immediate implementation of forward guidance and quantitative easing, followed by credit easing when containment measures are lifted, delivers the best outcome. We also quantify the fiscal response needed to offset the gap in gross domestic product created by the effective lower bound, given operational limitations in scaling up EMPs.

Date: 2026
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Working Paper: Does the sequence matter: interest rates, quantitative easing or forward guidance? (2025)
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