Canadian Interest Rate Setting: The Information Content of Canadian and U.S. Central Bank Communication
Bernd Hayo () and
Matthias Neuenkirch ()
No 200935, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)
We explain Canadian target rate decisions using macroeconomic variables as well as Bank of Canada (BOC) and Federal Reserve (Fed) 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, and most 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.
Keywords: Bank of Canada; Central Bank Communication; Federal Reserve Bank; Interest Rate Decision; Monetary Policy; Ordered Probit Model; Taylor Rule (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
Pages: 25 pages
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://www.uni-marburg.de/en/fb02/research-groups ... ers/35-2009_hayo.pdf Third version, 2010 (application/pdf)
Journal Article: Canadian Interest Rate Setting: The Information Content of Canadian and U.S. Central Bank Communication (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200935
Access Statistics for this paper
More papers in MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) Contact information at EDIRC.
Bibliographic data for series maintained by Bernd Hayo ().