Template-Type: ReDIF-Paper 1.0
Author-Name: Callum Jones
Author-X-Name-First: Callum
Author-X-Name-Last: Jones
Author-Name: Mariano Kulish
Author-X-Name-First: Mariano
Author-X-Name-Last: Kulish
Author-Name: Daniel Rees
Author-X-Name-First: Daniel
Author-X-Name-Last: Rees
Title: International spillovers of forward guidance shocks
Abstract: We estimate a two-country model of the US and Canada over the post 2009 sample to study the cross-country spillovers of forward guidance shocks. To do so, we propose a method to identify forward guidance shocks during the fixed interest rate regime. US forward guidance shocks have a larger impact than conventional monetary policy shocks. A 2 quarter expansionary forward guidance shock decreases Canadian output by about 0.2% to 0.4% on impact. The effect of US forward guidance shocks on Canadian output, unlike conventional policy shocks, depends crucially on the state of the US risk premium shock. The estimated forward guidance shocks coincide with significant US monetary policy announcements such as the introduction of calendar based guidance.
Length: 56 pages
Creation-Date: 2020-07
File-URL: https://www.bis.org/publ/work870.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work870.htm
File-Format: text/html
Number: 870
Classification-JEL: E2, E4, E5, F4
Keywords: forward guidance shocks, identification, spillovers, zero lower bound
Handle: RePEc:bis:biswps:870