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International effects of euro area forward guidance

Author

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  • Maximilian Bock
  • Martin Feldkircher
  • Pierre L. Siklos

Abstract

This paper explores the domestic and international effects of an increase in observed interest rates (conventional monetary policy) and expected interest rates (forward guidance). We find significant spillovers to a broad range of countries when both are subject to a tightening shock: Output growth and inflation decelerate and equity returns decline. Currencies of euro area neighboring countries tend to depreciate against the euro. A tightening forward guidance shock triggers more persistent effects on euro area and international interest rates. We find that international effects vary over the sample period when either interest rates are shocked.

Suggested Citation

  • Maximilian Bock & Martin Feldkircher & Pierre L. Siklos, 2020. "International effects of euro area forward guidance," CAMA Working Papers 2020-54, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2020-54
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    Cited by:

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    3. Martin Feldkircher & Paul Hofmarcher & Pierre L. Siklos, 2021. "What do central banks talk about? A European perspective on central bank communication," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/21, pages 61-81.
    4. Boeck, Maximilian & Feldkircher, Martin, 2021. "The Impact of Monetary Policy on Yield Curve Expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 887-901.
    5. Martin Feldkircher & Helene Schuberth, 2023. "Understanding Monetary Spillovers in Highly Integrated Regions: The Case of Europe," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(4), pages 859-893, August.
    6. Razieh Zahedi & Asghar Shahmoradi & Ali Taiebnia, 2022. "The ever-evolving trade pattern: a global VAR approach," Empirical Economics, Springer, vol. 63(3), pages 1193-1218, September.

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    More about this item

    Keywords

    Spillovers; interest rate expectations; forward guidance; GVAR;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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