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A Note on the Reactions of Real Yields to Different Types of Forward Guidance in the US

Author

Listed:
  • Frederik Neugebauer

    (WHU - Otto Beisheim School of Management)

  • Ralf Fendel

    (WHU - Otto Beisheim School of Management)

  • Nils Niederhagen

    (WHU - Otto Beisheim School of Management)

Abstract

We analyze the effectiveness of forward guidance in the United States in form of an event study. The results confirm that in general forward guidance has a significant adverse effect on US Treasury Inflation-Protected Securities yields. However, the parallel announcement of asset purchases dampens the effectiveness of forward guidance. By additionally decomposing forward guidance into three types we find that date-based is the most effective form while qualitative-based and threshold-based forward guidance show only minor impacts.

Suggested Citation

  • Frederik Neugebauer & Ralf Fendel & Nils Niederhagen, 2017. "A Note on the Reactions of Real Yields to Different Types of Forward Guidance in the US," Economics Bulletin, AccessEcon, vol. 37(4), pages 2703-2710.
    • Handle: RePEc:ebl:ecbull:eb-17-00719
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    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I4-P242.pdf
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    References listed on IDEAS

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    1. Alisdair McKay & Emi Nakamura & Jón Steinsson, 2016. "The Power of Forward Guidance Revisited," American Economic Review, American Economic Association, vol. 106(10), pages 3133-3158, October.
    2. Woodford, Michael, 2013. "Forward Guidance by Inflation-Targeting Central Banks," CEPR Discussion Papers 9722, C.E.P.R. Discussion Papers.
    3. Jeffrey R. Campbell & Charles L. Evans & Jonas D.M. Fisher & Alejandro Justiniano, 2012. "Macroeconomic Effects of Federal Reserve Forward Guidance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(1 (Spring), pages 1-80.
    4. Richhild Moessner, 2015. "Reactions of real yields and inflation expectations to forward guidance in the United States," Applied Economics, Taylor & Francis Journals, vol. 47(26), pages 2671-2682, June.
    5. Jeffrey R. Campbell & Jonas D. M. Fisher & Alejandro Justiniano & Leonardo Melosi, 2017. "Forward Guidance and Macroeconomic Outcomes since the Financial Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 31(1), pages 283-357.
    6. Andrew Filardo & Boris Hofmann, 2014. "Forward guidance at the zero lower bound," BIS Quarterly Review, Bank for International Settlements, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ralf Fendel & Frederik Neugebauer, 2018. "Country-Specific Euro Area Government Bond Yield Reactions to ECB’s Non-Standard Monetary Policy Announcements," WHU Working Paper Series - Economics Group 18-02, WHU - Otto Beisheim School of Management.
    2. Ralf Fendel & Jan Heins & Oliver Mohr, 2020. "The Effect of the ECB’s Forward Guidance on Interest Rate Forecasts," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(8), pages 1-52, August.

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    More about this item

    Keywords

    forward guidance; monetary policy; real yields;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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