Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/310441 
Year of Publication: 
2025
Series/Report no.: 
NBB Working Paper No. 471
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
I show that in linear rational expectation models, the effect of a monetary tightening can be simulated using contemporaneous and anticipated monetary policy shocks that replicate the forward curves observed during the period of interest, normalized with the forward curve observed in the quarter before the tightening period of interest begins. In particular, the shocks in response to which the tightening occurs are irrelevant. All required information is incorporated in the normalized forward curves. I confirm this result via simulations and a formal proof. Then I use it to assess the effects of the recent monetary tightening in the Euro Area.
Subjects: 
policy counterfactuals
monetary policy
interest rate expectations
JEL: 
E52
E43
Document Type: 
Working Paper

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