EconPapers    
Economics at your fingertips  
 

Interest rate spreads and forward guidance

Christian Bredemeier, Christoph Kaufmann and Andreas Schabert

No 2186, Working Paper Series from European Central Bank

Abstract: We provide evidence that liquidity premia on assets that are more relevant for private agents’ intertemporal choices than near-money assets increase in response to expansionary forward guidance announcements. We introduce a structural specification of liquidity premia based on assets’ differential pledgeability to a basic New Keynesian model to replicate this finding. This model predicts that output and inflation effects of forward guidance do not increase with the length of the guidance period and are substantially smaller than if liquidity premia were neglected. This indicates that there are no puzzling forward guidance effects when endogenous liquidity premia are taken into account. JEL Classification: E32, E42, E52

Keywords: forward guidance; liquidity premium; unconventional monetary policy (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-mac and nep-mon
Note: 2857527
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2186.en.pdf (application/pdf)

Related works:
Working Paper: Interest Rate Spreads and Forward Guidance (2018) Downloads
Working Paper: Interest Rate Spreads and Forward Guidance (2017) Downloads
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:ecb:ecbwps:20182186

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

 
Page updated 2025-03-22
Handle: RePEc:ecb:ecbwps:20182186