Change search
ReferencesLink to record
Permanent link

Direct link
Forward Guidance
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies. Stockholm School of Economics, Sweden; Centre for Economic Policy Research (CEPR), Sweden; National Bureau of Economic Research (NBER), USA.
Number of Authors: 1
2015 (English)In: The International Journal of Central Banking, ISSN 1815-4654, E-ISSN 1815-7556, Vol. 11, no 4, 19-64 p.Article in journal (Refereed) Published
Abstract [en]

Forward guidance about future policy settings, in the form of a published policy rate path, has for many years been a natural part of normal monetary policy for several central banks, including the Reserve Bank of New Zealand and the Swedish Riksbank. More recently, the Federal Reserve has started to publish FOMC participants' policy rate projections. The Swedish, New Zealand, and U.S. experience of a published policy rate path is examined, especially to what extent the market has anticipated the path (the predictability of the path) and to what extent market expectations line up with the path after publication (the credibility of the path). The recent Swedish experience is quite dramatic. In particular, it shows a case with a large discrepancy between a high and rising Riksbank path and a low and falling market path, with the market path providing a good forecast of the future policy rate. The discrepancy is explained by the Riksbank's leaning against the wind in recent years and related circumstances. The New Zealand experience is less dramatic but shows cases where the market implements either a substantially tighter or easier policy than intended by the RBNZ. There are also cases of the market being ahead of the RBNZ and the RBNZ later following the market. The U.S. experience includes a recent case of the market expecting and implementing substantially easier policy consistent with the FOMC projections, the possible explanation of which has been much discussed.

Place, publisher, year, edition, pages
2015. Vol. 11, no 4, 19-64 p.
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-125039ISI: 000366349400002OAI: oai:DiVA.org:su-125039DiVA: diva2:891752
Available from: 2016-01-07 Created: 2016-01-07 Last updated: 2016-01-07Bibliographically approved

Open Access in DiVA

No full text

Search in DiVA

By author/editor
Svensson, Lars E. O.
By organisation
Institute for International Economic Studies
In the same journal
The International Journal of Central Banking
Economics and Business

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 20 hits
ReferencesLink to record
Permanent link

Direct link