Publication of Interest Rate Paths: Guidance?

32 Pages Posted: 5 Dec 2018

See all articles by Gisle James James Natvik

Gisle James James Natvik

BI Norwegian Business School - Department of Economics

Dagfinn Rime

BI Norwegian Business School

Olav Syrstad

Norges Bank

Date Written: June 22, 2018

Abstract

Does the central bank practice of publishing interest rate projections (IRPs) improve market participants' interpretation of what new information implies for future interest rates? From high-frequent forward rate agreements we compute market forecast errors; differences between expected future interest rates and ex post realizations. We assess their change in narrow windows around monetary policy announcements and macroeconomic releases in Norway and Sweden. Overall, it does not seem that communication of future policy plans improves markets' response to information, irrespective of whether or not IRPs are in place. Decomposition of market reactions into "target" and "path" factors, separating monetary policy actions from signals about the future, reveals that when monetary policy announcements have improved market forecasts in Norway or Sweden, this has occurred via policy actions only.

Keywords: monetary policy, interest rate paths, forward guidance, high-frequency data, forecasts

JEL Classification: D72, O13, Q33

Suggested Citation

Natvik, Gisle James James and Rime, Dagfinn and Syrstad, Olav, Publication of Interest Rate Paths: Guidance? (June 22, 2018). Available at SSRN: https://ssrn.com/abstract=3279149 or http://dx.doi.org/10.2139/ssrn.3279149

Gisle James James Natvik

BI Norwegian Business School - Department of Economics ( email )

Nydalsveien 37
Oslo, 0484
Norway

Dagfinn Rime

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
+47-46410507 (Phone)

HOME PAGE: http://home.bi.no/dagfinn.rime/

Olav Syrstad (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Register to save articles to
your library

Register

Paper statistics

Downloads
20
Abstract Views
276
PlumX Metrics