IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v124y2014i3p358-361.html
   My bibliography  Save this article

Stale forward guidance

Author

Listed:
  • Detmers, Gunda-Alexandra
  • Nautz, Dieter

Abstract

Quarterly central bank projections regarding future interest rate decisions may become stale when new information enters the market. Using data from New Zealand, we find the predicted time-varying and state-dependent effects of interest rate projections on market expectations and uncertainty.

Suggested Citation

  • Detmers, Gunda-Alexandra & Nautz, Dieter, 2014. "Stale forward guidance," Economics Letters, Elsevier, vol. 124(3), pages 358-361.
  • Handle: RePEc:eee:ecolet:v:124:y:2014:i:3:p:358-361
    DOI: 10.1016/j.econlet.2014.06.025
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176514002365
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.econlet.2014.06.025?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    2. Michael D. Bauer, 2012. "Monetary policy and interest rate uncertainty," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec24.
    3. 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.
    4. Richhild Moessner, 2014. "Effects of explicit FOMC policy-rate guidance on equities and risk measures," Applied Economics, Taylor & Francis Journals, vol. 46(18), pages 2139-2153, June.
    5. Gunda-Alexandra Detmers & Dieter Nautz, 2012. "The Information Content of Central Bank Interest Rate Projections: Evidence from New Zealand," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 323-329, September.
    6. Swanson, Eric T., 2006. "Have Increases in Federal Reserve Transparency Improved Private Sector Interest Rate Forecasts?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 791-819, April.
    7. Guender, Alfred V. & Rimer, Oyvinn, 2008. "The implementation of monetary policy in New Zealand: What factors affect the 90-day bank bill rate?," The North American Journal of Economics and Finance, Elsevier, vol. 19(2), pages 215-234, August.
    8. Lars Winkelmann, 2013. "Quantitative forward guidance and the predictability of monetary policy - A wavelet based jump detection approach -," SFB 649 Discussion Papers SFB649DP2013-016, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    9. Giuseppe Ferrero & Alessandro Secchi, 2009. "The Announcement of Monetary Policy Intentions," Temi di discussione (Economic working papers) 720, Bank of Italy, Economic Research and International Relations Area.
    10. Richhild Moessner, 2013. "Effects of explicit FOMC policy rate guidance on market interest rates," DNB Working Papers 384, Netherlands Central Bank, Research Department.
    11. repec:pri:cepsud:161blinder is not listed on IDEAS
    12. Michael Ehrmann & David Sondermann, 2012. "The News Content of Macroeconomic Announcements: What if Central Bank Communication Becomes Stale?," International Journal of Central Banking, International Journal of Central Banking, vol. 8(3), pages 1-53, September.
    13. Hughes Hallett, Andrew & Di Bartolomeo, Giovanni & Acocella, Nicola, 2012. "A general theory of controllability and expectations anchoring for small-open economies," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 397-411.
    14. Moessner, Richhild, 2013. "Effects of explicit FOMC policy rate guidance on interest rate expectations," Economics Letters, Elsevier, vol. 121(2), pages 170-173.
    15. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael Frenkel & Jin-Kyu Jung & Jan-Christoph Rülke, 2017. "Rationalizing the Bias in Central Banks' Interest Rate Projections," WHU Working Paper Series - Economics Group 17-03, WHU - Otto Beisheim School of Management.
    2. Richhild Moessner & David-Jan Jansen & Jakob de Haan, 2017. "Communication About Future Policy Rates In Theory And Practice: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 678-711, July.
    3. Detmers, Gunda-Alexandra, 2016. "Forward Guidance under Disagreement - Evidence from the Fed’s dot projections," VfS Annual Conference 2016 (Augsburg): Demographic Change 145768, Verein für Socialpolitik / German Economic Association.
    4. Gunda-Alexandra Detmers, 2016. "Forward Guidance under Disagreement - Evidence from the Fed's Dot Projections," SFB 649 Discussion Papers SFB649DP2016-041, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    5. Amaya, Diego & Filbien, Jean-Yves, 2015. "The similarity of ECB’s communication," Finance Research Letters, Elsevier, vol. 13(C), pages 234-242.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Detmers, Gunda-Alexandra & Nautz, Dieter, 2013. "How Stale Central Bank Interest Rate Projections Affect Interest Rate Uncertainty," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79861, Verein für Socialpolitik / German Economic Association.
    2. Galati, Gabriele & Moessner, Richhild, 2021. "Effects of Fed policy rate forecasts on real yields and inflation expectations at the zero lower bound," Economics Letters, Elsevier, vol. 198(C).
    3. Moessner, Richhild, 2015. "Reactions of US government bond yields to explicit FOMC forward guidance," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 217-233.
    4. Richhild Moessner & David-Jan Jansen & Jakob de Haan, 2017. "Communication About Future Policy Rates In Theory And Practice: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 678-711, July.
    5. Gunda-Alexandra Detmers & Özer Karagedikli & Richhild Moessner, 2018. "Quantitative or Qualitative Forward Guidance: Does it Matter?," CESifo Working Paper Series 7314, CESifo.
    6. Richhild Moessner, 2015. "International spillovers from US forward guidance to equity markets," Applied Economics, Taylor & Francis Journals, vol. 47(42), pages 4549-4560, September.
    7. Clemens J. M. Kool & Daniel L. Thornton, 2015. "How Effective Is Central Bank Forward Guidance?," Review, Federal Reserve Bank of St. Louis, vol. 97(4), pages 303-322.
    8. Michelle Bongard & Gabriele Galati & Richhild Moessner & William Nelson, 2021. "Connecting the dots: Market reactions to forecasts of policy rates and forward guidance provided by the Fed," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 684-706, January.
    9. van Holle, Frederiek, 2017. "Essays in empirical finance and monetary policy," Other publications TiSEM 30d11a4b-7bc9-4c81-ad24-5, Tilburg University, School of Economics and Management.
    10. Jitmaneeroj, Boonlert & Lamla, Michael J. & Wood, Andrew, 2019. "The implications of central bank transparency for uncertainty and disagreement," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 222-240.
    11. Kedan, Danielle & Stuart, Rebecca, 2014. "Central Bank Communications: A Comparative Study," Quarterly Bulletin Articles, Central Bank of Ireland, pages 89-104, April.
    12. Alan Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2017. "Necessity as the mother of invention: monetary policy after the crisis," Economic Policy, CEPR;CES;MSH, vol. 32(92), pages 707-755.
    13. Benjamin D. Keen & Alexander W. Richter & Nathaniel A. Throckmorton, 2017. "Forward Guidance And The State Of The Economy," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1593-1624, October.
    14. Ruttachai Seelajaroen & Pornanong Budsaratragoon & Boonlert Jitmaneeroj, 2020. "Do monetary policy transparency and central bank communication reduce interest rate disagreement?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(3), pages 368-393, April.
    15. Grahame Johnson & Sharon Kozicki & Romanos Priftis & Lena Suchanek & Jonathan Witmer & Jing Yang, 2020. "Implementation and Effectiveness of Extended Monetary Policy Tools: Lessons from the Literature," Discussion Papers 2020-16, Bank of Canada.
    16. Jeffrey R. Campbell & Thomas B. King & Anna Orlik & Rebecca Zarutskie, 2020. "Issues Regarding the Use of the Policy Rate Tool," Finance and Economics Discussion Series 2020-070, Board of Governors of the Federal Reserve System (U.S.).
    17. Di Bartolomeo Giovanni & Hughes Hallett Andrew & Acocella Nicola, 2013. "When Can Policy Makers Anchor Expectations? Dynamic controllability and the limits to time inconsistency," wp.comunite 0104, Department of Communication, University of Teramo.
    18. Rholes, Ryan & Petersen, Luba, 2021. "Should central banks communicate uncertainty in their projections?," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 320-341.
    19. Christopher S. Sutherland, 2020. "Forward Guidance and Expectation Formation: A Narrative Approach," Staff Working Papers 20-40, Bank of Canada.
    20. Moessner, Richhild, 2013. "Effects of explicit FOMC policy rate guidance on interest rate expectations," Economics Letters, Elsevier, vol. 121(2), pages 170-173.

    More about this item

    Keywords

    Central bank interest rate projections; Central bank communication; Quantitative forward guidance; Interest rate uncertainty;
    All these keywords.

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:124:y:2014:i:3:p:358-361. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/ecolet .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.