Canadian Interest Rate Setting: The Information Content of Canadian and U.S. Central Bank Communication
AbstractWe 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200935.
Length: 25 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Bank of Canada; Central Bank Communication; Federal Reserve Bank; Interest Rate Decision; Monetary Policy; Ordered Probit Model; Taylor Rule;
Other versions of this item:
- Bernd Hayo & firstname.lastname@example.org & Matthias Neuenkirch, 2011. "Canadian Interest Rate Setting: The Information Content of Canadian and U.S. Central Bank Communication," Southern Economic Journal, Southern Economic Association, vol. 78(1), pages 131-148, July.
- 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
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-11 (All new papers)
- NEP-CBA-2009-09-11 (Central Banking)
- NEP-MAC-2009-09-11 (Macroeconomics)
- NEP-MON-2009-09-11 (Monetary Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bernd Hayo & Matthias Neuenkirch, 2010.
"Bank of Canada Communication, Media Coverage, and Financial Market Reactions,"
MAGKS Papers on Economics
201020, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Hayo, Bernd & Neuenkirch, Matthias, 2012. "Bank of Canada communication, media coverage, and financial market reactions," Economics Letters, Elsevier, vol. 115(3), pages 369-372.
- Neuenkirch, Matthias, 2012.
"Managing financial market expectations: The role of central bank transparency and central bank communication,"
European Journal of Political Economy,
Elsevier, vol. 28(1), pages 1-13.
- Matthias Neuenkirch, 2010. "Managing Financial Market Expectations: The Role of Central Bank Transparency and Central Bank Communication," MAGKS Papers on Economics 201028, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernd Hayo).
If references are entirely missing, you can add them using this form.