Government bond yield sensitivity to economic news at the zero lower bound in Canada in comparison with the UK and US

Moessner, Richhild

doi:10.1080/09603107.2014.902019

Cited by 1 publication

(2 citation statements)

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“…We study whether the sensitivity to economic news of short‐ to long‐term interest rates implied by interest rate swaps in Sweden was affected by the ZLB of the policy rate. Following Swanson and Williams (2014a, 2014b), we interpret the sensitivity of interest rates to economic news as a measure of the effectiveness of monetary policy at the ZLB (see also Moessner ).…”

Section: Introductionmentioning

confidence: 99%

“…The Bank of Canada made its forward guidance conditional on the outlook for inflation (Carney ). As expectations about the economic outlook change, partly because of the publication of macroeconomic news, expectations about the central bank's future policy rates will change, in turn affecting longer‐term market interest rates; consequently, longer‐term market interest rates can continue to respond to macroeconomic news under the ZLB (Moessner ). Such policy‐rate guidance could increase the understanding by market participants of the central bank's reaction function to economic news.…”

Section: Introductionmentioning

confidence: 99%

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Effectiveness of Monetary Policy in Sweden

Moessner

Haan

Jansen

2015

Contemporary Economic Policy

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We study whether the sensitivity of Swedish interest rates to domestic economic news was affected by the zero lower bound (ZLB) and forward guidance. We find that the sensitivity was reduced at the ZLB at short but not at longer maturities, suggesting that monetary policy remained effective at longer horizons. Moreover, it was unaffected during a later period of the ZLB/negative policy rates, suggesting that monetary policy remained effective at all horizons then. We also find that the sensitivity of interest rates to domestic news was unaffected by forward guidance, suggesting that market participants understood the conditionality of the forward guidance. (JEL E52, E58) * We would like to thank an anonymous referee, Birger Vikoren, participants in the DNB Annual Research Conference 2014 on "Forward guidance and communication about unconventional monetary policy" and seminar participants at de Nederlandsche Bank and the Central Bank of the Republic of Turkey for helpful comments, and Agne Subelyte for excellent help with the data.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%