When is Lift-Off? Evaluating Forward Guidance from the Shadow

Matthias Neuenkirch and Pierre Siklos

Open Economies Review, 2014, vol. 25, issue 5, 819-839

Abstract: We examine the record of the CD Howe’s shadow Monetary Policy Council (SMPC) in Canada. We report a considerable diversity of opinion about the recommended future path of interest rates inside the SMPC. During the period of Bank of Canada forward guidance, market determined forward rates diverge considerably from the recommendations implied by the SMPC. Nevertheless, there is little evidence that the Bank of Canada and the SMPC coordinate their future views about the interest rate path. Finally, changes in views about future changes in policy rates for horizons beyond the next two interest rate decisions are difficult to explain. Our findings imply that there remain challenges in understanding the evolution of future interest rate paths over time. We conclude with some policy implications. Copyright Springer Science+Business Media New York 2014

Keywords: Bank of Canada; Central bank communication; Forward guidance; Monetary policy committees; Shadow councils; Taylor rules; E43; E52; E58; E61; E69 (search for similar items in EconPapers)
Date: 2014
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Working Paper: When is Lift-off? Evaluating Forward Guidance from the Shadow (2014)
Working Paper: WHEN IS LIFT-OFF? EVALUATING FORWARD GUIDANCE FROM THE SHADOW (2014)
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DOI: 10.1007/s11079-014-9328-6

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