Working Paper Series, Sveriges Riksbank (Central Bank of Sweden)
How big is the toolbox of a central banker? Managing expectations with policy-rate forecasts: Evidence from Sweden
Abstract: Some central banks have decided to publish forecasts of
their policy rates. Can such forecasts manage market expectations of future
policy rates? I use regression analysis on Swedish data to conclude that
the answer is yes. The published Riksbank forecasts affect expectations of
the future repo rate up to a horizon of approximately a year and a half.
However, the response of market expectations to a surprise in the announced
repo-rate path is not one-to-one, but is estimated to be less than half of
the surprise and decreasing with the forecast horizon.
Keywords: Policy-rate path; monetary-policy expectations; (follow links to similar papers)
JEL-Codes: E52; E58; G14; (follow links to similar papers)
40 pages, May 1, 2017
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