Canadian Interest Rate Setting: The Information Content of Canadian and U.S. Central Bank Communication

Bernd Hayo and Matthias Neuenkirch

Southern Economic Journal, 2011, vol. 78, issue 1, 131-148

Abstract: We explain Canadian target rate decisions using macroeconomic variables as well as Bank of Canada and Federal Reserve communication indicators. Econometrically, we employ an ordered probit model of a Taylor rule to explain and predict 60 target rate decisions between 1998 and 2006. We find that communications, especially speeches and testimony by Canadian Governing Council members, provide a significant and robust explanation of Canadian target rate decisions. However, prior to the introduction of fixed announcement dates, Canadian communications contained more information on upcoming policy moves. Finally, communications by the U.S. Federal Reserve Bank—which are much more frequent—outperform our Canadian communication indicators in explaining Canadian interest rate decisions.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.4284/0038-4038-78.1.131

Related works:
Working Paper: Canadian Interest Rate Setting: The Information Content of Canadian and U.S. Central Bank Communication (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:78:y:2011:i:1:p:131-148

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().