Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103796
Authors: 
Detmers, Gunda-Alexandra
Nautz, Dieter
Year of Publication: 
2014
Series/Report no.: 
SFB 649 Discussion Paper 2014-027
Abstract: 
An increasing number of central banks manage market expectations via interest rate projections. Typically, those projections are updated only quarterly and thus, may become stale when new information enters the market. We use data from New Zealand to investigate the time-varying and state-dependent effects of interest rate projections on market expectations and interest rate uncertainty. Confirming the stabilizing effect of fresh central bank announcements, we show that interest rate uncertainty rises between two projection releases. Moreover, rate uncertainty and the importance of macroeconomic news increase if expectations deviate from the rate projected by the central bank. Counterfactual analysis suggests that the efficiency of projections would improve if the central bank updated its projection whenever it becomes stale.
Subjects: 
Central bank interest rate projections
central bank communication
quantitative forward guidance
interest rate uncertainty
JEL: 
E52
E58
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.