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The Norges Bank’s key rate projections and the news element of monetary policy: a wavelet based jump detection approach

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  • Lars Winkelmann
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    Abstract

    This paper investigates the information content of the Norges Bank’s key rate projections. Wavelet spectrum estimates provide the basis for estimating jump probabilities of short- and long-term interest rates on monetary policy announcement days before and after the introduction of key rate projections. The behavior of short-term interest rates reveals that key rate projections have only little effects on market’s forecasting ability of current target rate changes. In contrast, longer-term interest rates indicate that the announcement of key rate projections has significantly reduced market participants’ revisions of the expected future policy path. Therefore, the announcement of key rate projections further improves central bank communication.

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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2010-062.pdf
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    Bibliographic Info

    Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2010-062.

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    Length: 31 pages
    Date of creation: Dec 2010
    Date of revision:
    Handle: RePEc:hum:wpaper:sfb649dp2010-062

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    Related research

    Keywords: Central bank communication; interest rate projections; wavelets; jump probabilities;

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    1. 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.
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