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Effects of explicit FOMC policy rate guidance on interest rate expectations

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  • Moessner, Richhild
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    Abstract

    We quantify the impact of explicit FOMC policy rate guidance announcements at the zero lower bound on Eurodollar interest rate futures. We find that they significantly reduced implied interest rates and led to a flattening of the yield curve.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 121 (2013)
    Issue (Month): 2 ()
    Pages: 170-173

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    Handle: RePEc:eee:ecolet:v:121:y:2013:i:2:p:170-173

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Monetary policy; Central bank communication; Policy rate guidance;

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    References

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    1. Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2006. "Market-based measures of monetary policy expectations," Working Paper Series 2006-04, Federal Reserve Bank of San Francisco.
    2. Michael Woodford, 2012. "Methods of policy accommodation at the interest-rate lower bound," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 185-288.
    3. Boris Hofmann & Feng Zhu, 2013. "Central bank asset purchases and inflation expectations," BIS Quarterly Review, Bank for International Settlements, March.
    4. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Working Papers 1038, Princeton University, Department of Economics, Center for Economic Policy Studies..
    5. Stefania D’Amico & William English & David López‐Salido & Edward Nelson, 2012. "The Federal Reserve's Large‐scale Asset Purchase Programmes: Rationale and Effects," Economic Journal, Royal Economic Society, vol. 122(564), pages F415-F446, November.
    6. Gunda-Alexandra Detmers & Dieter Nautz, 2011. "The information content of central bank interest rate projections: Evidence from New Zealand," SFB 649 Discussion Papers SFB649DP2011-032, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    7. Puneet Chehal & Bharat Trehan, 2009. "Talking about tomorrow’s monetary policy today," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov9.
    8. Andersson, Magnus & Hofmann, Boris, 2009. "Gauging the effectiveness of quantitative forward guidance: evidence from three inflation targeters," Working Paper Series 1098, European Central Bank.
    9. John Williams & Eric Swanson, 2012. "Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates," 2012 Meeting Papers 462, Society for Economic Dynamics.
    10. Refet Gurkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," Macroeconomics 0504013, EconWPA.
    11. Bernanke, Ben S., 2012. "Monetary Policy since the Onset of the Crisis : a speech at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 31, 2012," Speech 645, Board of Governors of the Federal Reserve System (U.S.).
    12. repec:use:tkiwps:1205 is not listed on IDEAS
    13. Zhongfang He, 2010. "Evaluating the Effect of the Bank of Canada's Conditional Commitment Policy," Discussion Papers 10-11, Bank of Canada.
    14. Richhild Moessner & William R. Nelson, 2008. "Central Bank Policy Rate Guidance and Financial Market Functioning," International Journal of Central Banking, International Journal of Central Banking, vol. 4(4), pages 193-226, December.
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    Cited by:
    1. Richhild Moessner, 2014. "International spillovers from US forward guidance to equity markets," DNB Working Papers 427, Netherlands Central Bank, Research Department.
    2. Gunda-Alexandra Detmers & Dieter Nautz, 2014. "Stale Forward Guidance," SFB 649 Discussion Papers SFB649DP2014-027, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    3. Detmers, Gunda-Alexandra & Nautz, Dieter, 2013. "How Stale Central Bank Interest Rate Projections Affect Interest Rate Uncertainty," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79861, Verein für Socialpolitik / German Economic Association.

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