Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79598
Authors: 
Winkelmann, Lars
Year of Publication: 
2013
Series/Report no.: 
SFB 649 Discussion Paper 2013-016
Abstract: 
The publication of a projected path of future policy decisions by central banks is a controversially debated method to improve monetary policy guidance. This paper suggests a new approach to evaluate the impact of the guidance strategy on the predictability of monetary policy. Using the example of Norway, the empirical investigation is based on jump probabilities of interest rates on central bank announcement days before and after the introduction of quantitative guidance. Within the standard semimartingale framework, we propose a new methodology to detect jumps. We derive a representation of the quadratic variation in terms of a wavelet spectrum. An adaptive threshold procedure on wavelet spectrum estimates aims at localizing jumps. Our main empirical result indicates that quantitative guidance significantly improves the predictability of monetary policy.
Subjects: 
central bank communication
interest rate projections
semimartingales
Locally Stationary Wavelet processes
jump detection
JEL: 
E58
C14
C58
Document Type: 
Working Paper

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