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The Effect of ECB Forward Guidance on Policy Expectations

Paul Hubert () and Fabien Labondance ()

No 2016-12, Working Papers from CRESE

Abstract: This paper investigates the instantaneous and dynamic effects of ECB forward guidance announcements on the term structure of private short-term interest rate expectations. We estimate the static and dynamic impact of forward guidance on private agents’ expectations about future short-term interest rates using a high-frequency methodology and an ARCH model, complemented with local projections. We find that ECB forward guidance announcements decrease most of the term structure of private short-term interest rate expectations, this being robust to several specifications. The effect is stronger on longer maturities and persistent.

Keywords: Central bank communication; Short-term interest rate expectations; OIS (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2016-10
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https://crese.univ-fcomte.fr/uploads/wp/WP-2016-12.pdf First version, 2016 (application/pdf)

Related works:
Working Paper: The effect of ECB forward guidance on policy expectations (2016) Downloads
Working Paper: The Effect of ECB Forward Guidance on Policy Expectations (2016) Downloads
Working Paper: The effect of ECB forward guidance on policy expectations (2016) Downloads
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