Quantitative or Qualitative Forward Guidance: Does it Matter?

30 Pages Posted: 31 Aug 2018

See all articles by Gunda-Alexandra Detmers

Gunda-Alexandra Detmers

University of Hamburg

Özer Karagedikli

Reserve Bank of New Zealand

Richhild Moessner

Bank for International Settlements (BIS)

Multiple version iconThere are 3 versions of this paper

Date Written: August 2018

Abstract

Every monetary policy decision by the Reserve Bank of New Zealand (RBNZ) is accompanied by a written statement about the state of the economy and the policy outlook, but only every second decision by a published interest rate forecast. We exploit this difference to study the relative influences of qualitative and quantitative forward guidance. We find that announcements that include an interest rate forecast lead to very similar market reactions across the yield curve as announcements that only include written statements. We interpret our results as implying that central bank communication is important, but that the exact form of that communication is less critical. Our results are also consistent with market participants understanding the conditional nature of the RBNZ interest rate forecasts.

Keywords: Monetary policy, forward guidance, interest rate forecasts

JEL Classification: E43; E44; E52; E58; G12

Suggested Citation

Detmers, Gunda-Alexandra and Karagedikli, Ozer and Moessner, Richhild, Quantitative or Qualitative Forward Guidance: Does it Matter? (August 2018). BIS Working Paper No. 742. Available at SSRN: https://ssrn.com/abstract=3241865

Gunda-Alexandra Detmers (Contact Author)

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Ozer Karagedikli

Reserve Bank of New Zealand ( email )

2 The Terrace
P.O. Box 2498
Wellington, 6011
New Zealand
64 4-471-3792 (Phone)
64 4-473-1209 (Fax)

Richhild Moessner

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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