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Overnight index swap market-based measures of monetary policy expectations

Simon Lloyd

No 709, Bank of England working papers from Bank of England

Abstract: I assess the use of overnight indexed swap (OIS) rates as measures of monetary policy expectations. I find that one to twelve-month US OIS rates provide measures of investors’ interest rate expectations that are comparable to those from corresponding-horizon federal funds futures rates, which have regularly been used as financial market-based measures of US interest rate expectations. More generally, I find that one to 24-month US, euro-zone and Japanese OIS rates and one to 18-month UK OIS rates tend to accurately measure expectations of future short-term interest rates. Motivated by these results, researchers can look to OIS rates as globally comparable measures of monetary policy expectations.

Keywords: Federal funds futures; overnight indexed swaps; monetary policy expectations (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2018-03-01
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Working Paper: Overnight Indexed Swap Market-Based Measures of Monetary Policy Expectations (2017) Downloads
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