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The ECB Forward Guidance: Effects on Expected Interest Rates

Posted: 30 Oct 2015  

Matthieu Picault

IÉSEG School of Management, Lille Campus

Date Written: June 18, 2015


On July the 4th of 2013 and after several other major central banks, the European Central Bank (ECB) gave for the first time a forward guidance on interest rates to affect market participants expectations of future interest rate in the context of a zero-lower-bound of main interest rates. Using an ARMAX(1,1) model where we disentangle the macroeconomic news component effect of the guidance and the commitment effect, we estimate the effect of this communication on money market interest rates through the Euro Area Overnight Index Swaps (OIS) at maturities between 2-month and 10-year using an event-study. Our preliminary results and robustness checks suggests the European guidance lowered OIS rates for maturities between 10-month to 3-year. These results would imply the existence of a commitment effect from the ECB communication. I also quantify the importance of the 3-year Long Term Refinancing Operation (LTRO) repayment and the OMT on the evolution of the OIS rates.

Keywords: OIS, monetary policy, ECB,event-study, LTRO, forward Guidance

JEL Classification: E50, E58

Suggested Citation

Picault, Matthieu, The ECB Forward Guidance: Effects on Expected Interest Rates (June 18, 2015). Available at SSRN: or

Matthieu Picault (Contact Author)

IÉSEG School of Management, Lille Campus ( email )

3 Rue de la Digue
Lille, 59000

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