The effect of ECB forward guidance on policy expectations
OFCE Working Paper
Paris : OFCE
OFCE Working Paper : 2016-30
Central Bank communication, Short term interest rate expectations, OIS
This paper investigates the instantaneous and dynamic effects of ECB forward guidance announcements on the term structure of private short-term interest rate expectations. We estimate the static and dynamic impact of forward guidance on private agents’ expectations about future short-term interest rates using a high-frequency methodology and an ARCH model, complemented with local projections. We find that ECB forward guidance announcements decrease most of the term structure of private short-term interest rate expectations, this being robust to several specifications. The effect is stronger on longer maturities and persistent.