International Effects of Euro Area Forward Guidance

41 Pages Posted: 22 May 2020

See all articles by Maximilian Böck (Boeck)

Maximilian Böck (Boeck)

Bocconi University

M. Feldkircher

affiliation not provided to SSRN

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs ; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Date Written: May 22, 2020

Abstract

This paper explores the domestic and international effects of an increase in observed interest rates (conventional monetary policy) and expected interest rates (forward guidance). We find significant spillovers to a broad range of countries when both are subject to a tightening shock: Output growth and inflation decelerate and equity returns decline. Currencies of euro area neighboring countries tend to depreciate against the euro. A tightening forward guidance shock triggers more persistent effects on euro area and international interest rates. We find that international effects vary over the sample period when either interest rates are shocked.

Keywords: Spillovers, interest rate expectations, forward guidance, GVAR

JEL Classification: E5, F3, C11, C30

Suggested Citation

Böck (Boeck), Maximilian and Feldkircher, M. and Siklos, Pierre L., International Effects of Euro Area Forward Guidance (May 22, 2020). CAMA Working Paper No. 54/2020, Available at SSRN: https://ssrn.com/abstract=3607634 or http://dx.doi.org/10.2139/ssrn.3607634

Maximilian Böck (Boeck)

Bocconi University ( email )

Via Roentgen 1
Milan, MI 20136
Italy

M. Feldkircher

affiliation not provided to SSRN

No Address Available

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

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