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Gauging the effectiveness of quantitative forward guidance: evidence from three inflation targeters

Author

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  • Andersson, Magnus
  • Hofmann, Boris

Abstract

This paper conducts a comparative analysis of the performances of the forward guidance strategies adopted by the Reserve Bank of New Zealand, the Norges Bank and the Riksbank, with the aim to gauge whether forward guidance via publication of an own interest rate path enhances a central bank’s ability to steer market expectations. Two main results emerge. First, we find evidence that all three central banks have been highly predictable in their monetary policy decisions and that long-term inflation expectations have been well anchored in the three economies, irrespective of whether forward guidance involved publication of an own interest rate path or not. Second, for New Zealand, we find weak evidence that a publication of a path could potentially enhance a central bank’s leverage on the medium term structure of interest rates. JEL Classification: E40, E43, E52

Suggested Citation

  • Andersson, Magnus & Hofmann, Boris, 2009. "Gauging the effectiveness of quantitative forward guidance: evidence from three inflation targeters," Working Paper Series 1098, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20091098
    Note: 568808
    as

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    More about this item

    Keywords

    central bank communication; forward guidance; monetary policy; term structure of interest rates; transparency;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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